[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
                    WASTE, ABUSE AND MISMANAGEMENT:
              CALCULATING THE COST OF DHS FAILED CONTRACTS

=======================================================================

                                HEARING

                               before the

                      SUBCOMMITTEE ON MANAGEMENT,
                     INVESTIGATIONS, AND OVERSIGHT

                                 of the

                     COMMITTEE ON HOMELAND SECURITY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 17, 2008

                               __________

                           Serial No. 110-140

                               __________

       Printed for the use of the Committee on Homeland Security
                                     

[GRAPHIC] [TIFF OMITTED] TONGRESS.#13


                                     

  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html

                               __________

                  U.S. GOVERNMENT PRINTING OFFICE
48-575                    WASHINGTON : 2009
-----------------------------------------------------------------------
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092104 Mail: Stop IDCC, Washington, DC 20402ï¿½0900012009


                     COMMITTEE ON HOMELAND SECURITY

               Bennie G. Thompson, Mississippi, Chairman

Loretta Sanchez, California          Peter T. King, New York
Edward J. Markey, Massachusetts      Lamar Smith, Texas
Norman D. Dicks, Washington          Christopher Shays, Connecticut
Jane Harman, California              Mark E. Souder, Indiana
Peter A. DeFazio, Oregon             Tom Davis, Virginia
Nita M. Lowey, New York              Daniel E. Lungren, California
Eleanor Holmes Norton, District of   Mike Rogers, Alabama
Columbia                             David G. Reichert, Washington
Zoe Lofgren, California              Michael T. McCaul, Texas
Sheila Jackson Lee, Texas            Charles W. Dent, Pennsylvania
Donna M. Christensen, U.S. Virgin    Ginny Brown-Waite, Florida
Islands                              Gus M. Bilirakis, Florida
Bob Etheridge, North Carolina        David Davis, Tennessee
James R. Langevin, Rhode Island      Paul C. Broun, Georgia
Henry Cuellar, Texas                 Candice S. Miller, Michigan
Christopher P. Carney, Pennsylvania
Yvette D. Clarke, New York
Al Green, Texas
Ed Perlmutter, Colorado
Bill Pascrell, Jr., New Jersey

                    I. Lanier Lavant, Staff Director

                     Rosaline Cohen, Chief Counsel

                     Michael Twinchek, Chief Clerk

                Robert O'Connor, Minority Staff Director

                                 ______

       SUBCOMMITTEE ON MANAGEMENT, INVESTIGATIONS, AND OVERSIGHT

             Christopher P. Carney, Pennsylvania, Chairman

Peter A. DeFazio, Oregon             Mike Rogers, Alabama
Yvette D. Clarke, New York           Michael T. McCaul, Texas
Ed Perlmutter, Colorado              Candice S. Miller, Michigan
Bill Pascrell, Jr., New Jersey       Peter T. King, New York (Ex 
Bennie G. Thompson, Mississippi (Ex  Officio)
Officio)

                    Tamla Scott, Director & Counsel

                         Daniel Wilkins, Clerk

                    Michael Russell, Senior Counsel

                                  (II)


                            C O N T E N T S

                              ----------                              
                                                                   Page

                               STATEMENTS

The Honorable Christopher P. Carney, a Representative in Congress 
  From the State of Pennsylvania, and Chairman, Subcommittee on 
  Management, Investigations, and Oversight......................     1
The Honorable Mike Rogers, a Representative in Congress From the 
  State of Alabama, and Ranking Member, Subcommittee on 
  Management, Investigations, and Oversight......................     2
The Honorable Bennie G. Thompson, a Representative in Congress 
  From the State of Mississippi, and Chairman, Committee on 
  Homeland Security..............................................     3

                               WITNESSES
                                Panel I

Mr. Richard K. Gunderson, Deputy Chief Procurement Officer, 
  Department of Homeland Security:
  Oral Statement.................................................     5
  Prepared Statement.............................................     7
Mr. James L. Taylor, Deputy Inspector General, Department of 
  Homeland Security:
  Oral Statement.................................................    11
  Prepared Statement.............................................    13
Mr. John P. Hutton, Director, Acquisition and Sourcing 
  Management, Government Accountability Office:
  Oral Statement.................................................    18
  Prepared Statement.............................................    20

                                Panel II

Ms. Marcia G. Madsen, Chair, Acquisition Advisory Panel:
  Oral Statement.................................................    40
  Prepared Statement.............................................    42
Mr. Scott Amey, General Counsel, Project On Government Oversight:
  Oral Statement.................................................    50
  Prepared Statement.............................................    51
Mr. Marc A. Pearl, President and Chief Executive Officer, 
  Homeland Security and Defense Business Council:
  Oral Statement.................................................    58
  Prepared Statement.............................................    60

                                Appendix

Questions From Ranking Member Mike Rogers........................    77


                    WASTE, ABUSE AND MISMANAGEMENT:
              CALCULATING THE COST OF DHS FAILED CONTRACTS

                              ----------                              


                     Wednesday, September 17, 2008

             U.S. House of Representatives,
                    Committee on Homeland Security,
 Subcommittee on Management, Investigations, and Oversight,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:05 p.m., in 
Room 311, Cannon House Office Building, Hon. Christopher P. 
Carney [Chairman of the subcommittee] presiding.
    Present: Representatives Carney, Thompson, Pascrell, and 
Rogers.
    Mr. Carney. The subcommittee will come to order.
    The subcommittee is meeting today to receive testimony on 
``Waste, Abuse and Mismanagement: Calculating the Cost of DHS 
Failed Contracts.''
    Today's hearing is the final Management, Investigations and 
Oversight Subcommittee hearing of the 110th Congress. By my 
count, this is the 19th hearing this subcommittee has held 
since February 2007. That doesn't even take into consideration 
the full committee hearings that built upon our work in this 
subcommittee and our work with other subcommittees.
    Looking back at what we have investigated and discussed in 
this venue over the last year and a half leads back to what is 
really at the root of today's hearing: a broken acquisition 
process at the Department of Homeland Security.
    We have heard countless times how difficult it is for 
corporate mergers between two businesses to be successful; how, 
on average, it takes 7 years; how much more difficult it is 
when 22 agencies are combined to form a new Federal 
bureaucracy, et cetera. This is nothing new. When 
Representative Rogers chaired this subcommittee, I am sure he 
heard the same thing. What happened to lessons learned?
    I think what is most frustrating for me during this 
Congress is hearing from DHS about taxpayers' dollars being 
wasted. As the only contact that many people in my district 
have with the Federal Government, how do I explain to them why 
DHS has spent tens of millions on a virtual fence along the 
southern border that hasn't given us any more protection? They 
ask how the Coast Guard could have so seriously botched 
upgrades to some ships that they now are floating scrap in the 
Baltimore Harbor instead of patrolling our coasts. Why did FEMA 
purchase so many trailers with such high levels of formaldehyde 
and then continue to place people in them even after it became 
aware of the dangers contained in the trailers?
    I was shocked to hear the Department was considering 
contracting with DynCorp to supplement the Border Patrol when 
DynCorp was simultaneously recruiting Border Patrol agents to 
become private security contractors in Iraq. Sure, the 
procurement process is a small piece of the acquisition 
process, but we have seen billions of taxpayers' dollars wasted 
in failed procurement. That is simply unacceptable.
    Our country's safety and preparedness is one of my top 
priorities, but DHS shouldn't have a blank check to buy 
anything it wants, nor should it be immune from any of the laws 
requiring it to conduct its business with due diligence. Tens 
of millions have been paid out to contractors for what amounts 
to nothing more than bad ideas and empty promises. We must look 
no further than Secure Flight or Emerger II for glaring 
examples. It all comes down to the fact that the acquisitions 
work force at DHS was overlooked and underdeveloped from the 
start, despite warnings from Congress, GAO and the best think 
tanks this country has to offer.
    The Department has gone through various senior executives 
since its inception, but three chief procurement officers in 
that amount of time really hasn't done much to solidify the 
acquisition shop. Independent Government investigators have 
told the tale, as have many testimonies before Congress, that 
there simply aren't enough personnel at the DHS acquisition 
shop itself.
    This isn't limited to DHS. There has been no shortage of 
criticism recently regarding the Federal Government's reliance 
upon lead systems integrators. We saw this with Deepwater. In 
DHS's case, if they are serious about righting the ship, they 
need to take some recently retired, very skilled Federal 
acquisition and procurement staff and take a tiny fraction of 
the taxpayers' dollars that have been wasted on DHS efforts to 
bring these people back to train the much-needed next 
generation of Federal acquisition and procurement officers.
    I am sure I am not alone in my frustration when it comes to 
Government waste. Unfortunately, no matter how many times DHS 
is told what they are doing wrong and how to improve what they 
do, nothing changes. Hopefully shining more light on the 
situation today at a point when DHS leadership can incorporate 
proposals for acquisition and procurement improvement in 
administration transition policies will make a difference.
    The Chair now recognizes the Ranking Member of the 
subcommittee, the gentleman from Alabama, for an opening 
statement.
    Mr. Rogers. Thank you, Mr. Chairman.
    I, too, would like to thank the witnesses for taking the 
time out of their schedule to be with us today as we talk about 
this very important area of procurement acquisition 
contracting.
    It is the first hearing I can remember since being on this 
committee that I was able to read in The Washington Post what 
took place in the hearing before we even had it, so you never 
know what is going to happen.
    When I was Chairman of this subcommittee in the 109th 
Congress, we conducted rigorous oversight of the Department's 
contracting and held numerous hearings in this area, so it is 
not a new phenomenon that we are experiencing here.
    In addition, this committee reported H.R. 5814, the 
Department of Homeland Security Authorization Act for Fiscal 
Year 2007, which included provisions on procurement reform, 
procurement training and stronger background reviews of 
contractors. An effective authorization bill covers these 
issues and is an integral part of this committee's work.
    To assist DHS in strengthening its procurement function, it 
is essential that this committee develop and pass an annual DHS 
authorization bill before Congress acts on the Homeland 
Security appropriations bill. However, since this does not 
appear possible at this late stage, Congress should at least 
move the annual appropriations bill. If an appropriations bill 
is not passed and DHS is forced to operate under a continuing 
resolution, the folks at the Department may not have all the 
resources they need to fulfill this critical mission.
    The Department has made significant improvements in 
acquisition management over the last several years. This 
subcommittee's oversight has helped the Department to craft 
long-term strategies to address its procurement problems. As we 
have seen, positive and constructive oversight can help the 
Department address its weaknesses. While more work clearly 
remains to be done, the Department has come a long way.
    I look forward to hearing from our witnesses today.
    Mr. Chairman, I yield back.
    Mr. Carney. Thank you.
    The Chair now recognizes the Chairman of the full 
committee, the gentleman from Mississippi, Mr. Thompson, for an 
opening statement.
    Mr. Thompson. Thank you very much.
    I would first like to thank Chairman Carney for holding 
this important hearing on an issue of vital concern.
    I am holding in my hand a table, and I will share it with 
the other Members, a list of some--and I emphasize ``some''--of 
the Department's programs that have been plagued with a litany 
of contract problems. Some of these programs were canceled due 
to contract failures, while others produced some results but 
never came close to fulfilling their proposed original 
intention. These planned contracts cost substantially more than 
their original budgets. DHS spent almost $15 billion--not 
million, billions with a ``B,'' as in ``boy''--of taxpayers' 
funds on these failed and planned programs.
    This hearing is one of the last hearings we will have 
before the 110th Congress adjourns, and unfortunately I must 
end this Congress with the same message to DHS that I gave at 
the beginning of this Congress. At the beginning of the 110th, 
I set forth an 8-point platform for the Committee on Homeland 
Security.
    The first plank in this platform set forth the need to 
improve the functionality, governance and accountability of the 
Department of Homeland Security. The heart of functionality, 
governance and accountability is simple: create an 
administrative and management system that is transparent and 
accountable. Agency officials must know where and how the money 
is being spent and must be able to ensure that a program 
receives internal oversight prior to its rollout and after its 
completion.
    DHS still has not created that kind of system. Instead, DHS 
leadership has permitted a system of waste, abuse, 
mismanagement, vague contractual terms, overspending, bonuses 
for bad performance, contractors being hired to oversee 
contractors in the same missteps over and over again. A casual 
look at some of the Department's efforts lead to disturbing 
findings: $5 million a mile for a fence; TWIC cards that can't 
be read; no readers for the TWIC cards that we can read. Now we 
find that TWIC cards may or may not lose their identity if they 
are attached to other credit cards in one's wallet. So we have 
some problems. Ships that don't fit into ports; formaldehyde-
laced trailers that make the occupants sick; an information-
sharing program that law enforcement personnel do not want to 
use.
    Taxpayers have had enough. Americans deserve a country that 
is safe, secure, and ready to respond in the event of a natural 
or manmade disaster. Americans expect that those given the 
responsibility of managing our scarce homeland security 
resources will do so responsibly, prudently, and with an eye 
toward avoiding waste.
    While the fate of these contracts will be left to the next 
President and the next Secretary of Homeland Security, as Chair 
of the Committee on Homeland Security my job is to hold the 
Department accountable right now.
    I have many things to say before, and I will say it again, 
Homeland Security's dollars are not to be wasted. They are 
dollars that could be used, if not wasted, to secure our 
borders like they should, but also to make our airports and 
airplanes safe and to help protect against those who wish to do 
us harm.
    Mr. Chairman, I look forward to the testimony of the 
witnesses as well as the follow-up on the questions. Thank you.
    Mr. Carney. Thank you, Mr. Chairman.
    Other Members of the subcommittee are reminded that, under 
committee rules, opening statements may be submitted for the 
record.
    I would now like to welcome the witnesses.
    Our first witness is Mr. Richard K. Gunderson. He is a 
deputy chief procurement officer at the Department of Homeland 
Security. Mr. Gunderson is a career Federal employee with 20 
years of public service in the acquisition career field. He 
came to DHS headquarters in April 2008, as the DCPO.
    Prior to that, he served as the Transportation Security 
Administration's assistant administrator for acquisition and 
chief procurement executive from November 2005 to April 2008. 
In that capacity, he was responsible for an annual $2 billion 
acquisition program in addition to providing acquisition 
support to TSA operations across the Nation's airports and 
other modes of transportation, as well as one of the largest, 
most complex acquisition programs in DHS.
    Our second witness, Mr. James L. Taylor, is a deputy 
inspector general of the Department of Homeland Security. Mr. 
Taylor was selected as deputy inspector general effective 
October 16, 2005. He previously served as the deputy chief 
financial officer and the director for financial management at 
the Department of Commerce.
    Prior to his work at Commerce, Mr. Taylor held the position 
of deputy chief financial officer at the Federal Emergency 
Management Agency, FEMA, where he was directly responsible for 
all financial operations, with expenditures of up to $10 
billion annually.
    Our third witness, Mr. John P. Hutton, currently serves as 
the director of acquisition and sourcing management at the U.S. 
Government Accountability Office. In this capacity, he provides 
direct support to congressional committees and Members on a 
range of acquisition and sourcing issues aimed at improving 
Federal agencies' ability to buy products and services 
effectively and efficiently.
    Throughout his GAO career, he has worked on a wide range of 
issues. This work led to several dozen reports and testimonies. 
Mr. Hutton began his GAO career in 1978. From 1983 to 1987, he 
served in GAO's former European office in Frankfurt, Germany, 
where he focused largely on defense and foreign affairs issues.
    Without objection, the witnesses' full statements will be 
inserted into the record.
    I now ask each witness to summarize his or her statement 
for 5 minutes, beginning with Mr. Gunderson.

  STATEMENT OF RICHARD K. GUNDERSON, DEPUTY CHIEF PROCUREMENT 
            OFFICER, DEPARTMENT OF HOMELAND SECURITY

    Mr. Gunderson. Thank you, Chairman Carney, Ranking Member 
Rogers, full committee Chairman Thompson and Members of the 
subcommittee. Thank you for this opportunity to appear before 
you to discuss the Department of Homeland Security acquisition 
program.
    I am the deputy chief procurement officer for the 
Department, with 20 years of public service in the acquisition 
career field.
    DHS has strengthened many aspects of its acquisition 
program over the first 5 years of the Department, and we 
continue to seek improvements to meet our mission and achieve 
acquisition excellence. In order to appreciate how far we have 
come, I would like to describe the growth in breadth of our 
organization.
    In March 2003, there were approximately 600 contracting 
specialists throughout seven contracting activities supporting 
the legacy components. Supporting the newly established 
headquarters was a single contracting officer detailed to 
personally handle and coordinate procurement requests from all 
newly established offices within headquarters. Today there are 
over 1,000 contracting specialists across the Department.
    Within the office of the chief procurement officer, there 
are 120 employees. Within the office of procurement operations, 
it has grown to a staff of 180. The chief procurement office is 
responsible for policy and oversight of the DHS acquisition 
program, including grants, competitive sourcing, strategic 
sourcing, e-business initiatives, acquisition work force 
analysis, cost analysis, and program management.
    As the Department has organized and defined its many 
missions, the acquisition of products and services has been 
essential to successfully securing our Nation. The requirements 
have been complex and diverse, including core infrastructure 
needs, security equipment, aircraft and ships, facilities, and 
emerging technologies. The threat is neither constant nor 
consistent, and, as a result, the acquisition program must be 
able to adapt and identify both near- and long-term solutions.
    In order to meet this mission, we continue to strengthen 
and institutionalize an acquisition framework that will provide 
a disciplined process that integrates planning, requirements, 
budgeting and acquisition. Earlier this year, the chief 
procurement officer, Tom Essig, identified his top three 
priorities for fiscal year 2008: quality contracting, quality 
program management, and quality people. While we have made 
significant progress on these three priorities, more remains to 
be done. For that reason, the CPO will retain the same 
priorities as the Department advances into fiscal year 2009.
    Priority No. 1: Quality contracting. We are focused on 
making good business decisions that enable us to meet mission 
and be good stewards of the taxpayer dollar. Our efforts in 
this area have not gone unnoticed. The Small Business 
Administration has notified DHS that we will receive our second 
consecutive ``green'' on the small-business procurement 
scorecard, recognizing the DHS acquisition community for its 
efforts in achieving various small-business and socioeconomic 
contracting goals.
    Also this year, the Office of Federal Procurement Policy 
recognized our competitive and acquisition excellence award 
program, which recognizes efforts in promoting and achieving 
competition and realizing cost savings and cost avoidance.
    Priority No. 2: Quality program management. In order to 
deliver mission capabilities, we are focused on strengthening 
other acquisition disciplines, including program management, 
cost analysis, logistics, systems engineering, and testing. 
Additionally, over the past 6 months, our Acquisition Program 
Management Division has worked with representatives from across 
the Department to develop and implement a revised management 
directive which will establish the acquisition management 
framework which will govern our investment programs.
    Priority No. 3: Quality people. One of the most hard-to-
fill occupational series within the Federal Government is the 
1102 contracting series. Last week, there were more than 1,400 
vacancy announcements for the 1102 job series across the 
Federal Government. At DHS, our targeted efforts include open 
and continuous job vacancy announcements at all grade levels, 
aggressive use of direct hire authority, expansive use of the 
Acquisition Professional Career Program, and the use of re-
employed annuitants.
    The same attention is being directed to the retention of 
our existing staff. We are committed to providing our employees 
with tools, developmental opportunities and workplace 
flexibilities inherent to best places to work.
    I have been a part of this Department since it was 
established, and today I can tell you I have been able to say 
each year along the way that we are stronger and doing better 
business than before. We have grown in numbers of acquisition 
professionals, we have implemented new policies and procedures, 
and we have implemented new business strategies that are more 
cost-effective and meet our missions.
    This is not an overnight process but one that requires a 
commitment to achieving excellence. I am proud of how far we 
have come and intend on pushing for continued change for the 
better.
    Thank you for the opportunity to testify before the 
subcommittee. I am glad to answer any questions you or the 
Members of the subcommittee may have for me.
    [The statement of Mr. Gunderson follows:]

               Prepared Statement of Richard K. Gunderson
                           September 17, 2008

    Chairman Carney, Ranking Member Rogers, and Members of the 
subcommittee, thank you for this opportunity to appear before you to 
discuss the Department of Homeland Security (DHS) acquisition program. 
I am the Deputy Chief Procurement Officer (DCPO) for the DHS, the co-
lead executive responsible for the management, administration and 
oversight of the Department's acquisition programs. In that capacity, I 
oversee and support ten procurement offices within DHS. The Office of 
the Chief Procurement Officer provides the infrastructure that provides 
the acquisition policies, procedures, training and work force 
initiatives that enables our acquisition professionals to support 
mission accomplishment while also being good stewards of taxpayer 
dollars.
    I am a career Federal employee, with 20 years of public service in 
the acquisition career field. I came to DHS Headquarters in April 2008 
as the DCPO. Prior to that, I was the Transportation Security 
Administration's (TSA) Assistant Administrator for Acquisition and 
Chief Procurement Executive from November 2005 to April 2008, 
responsible for an annual $2 billion acquisition program. In this 
position, I provided acquisition support to TSA operations across the 
Nation's airports and other modes of transportation as well as to one 
of the largest and most complex acquisition programs in DHS.
    As the Chief Procurement Executive, I provided executive leadership 
to TSA's acquisition program, including investment reviews, award and 
administration of contracts, financial assistance, interagency 
agreements and other transactions. I was also responsible for 
development of TSA's contracting work force and acquisition policy. I 
was a business advisor to TSA's leadership and instituted program 
management as a core competency at TSA. Before joining TSA in December 
2002, I was a Contracting Officer for the Department of Defense's Naval 
Sea System Command, where I led contracting efforts associated with 
numerous major weapon systems.

                    DHS ACQUISITION PROGRAM OVERVIEW

    As the Department has organized and defined its many missions, the 
acquisition of products and services has been essential to successfully 
securing our Nation. The requirements have been complex and diverse, 
including core infrastructure needs, security equipment, aircraft and 
ships, facilities, and emerging technologies. The threat is neither 
constant nor consistent, and as a result, the acquisition program must 
be able to adapt and identify both near- and long-term solutions. Since 
it was established, the Office of the Chief Procurement Officer's 
mission, in conjunction with the respective contracting offices, has 
been to provide the needed products and services to meet the DHS 
mission and do so in way that represents sound business and 
demonstrates we are good stewards of the taxpayers' dollars. In order 
to achieve this mission, we have and will continue to focus on our 
people and our processes. We recognize the need to have qualified 
professionals who are trained and certified to perform their respective 
duties in an increasingly complex and fluid regulatory and policy 
environment. We have made significant strides in creating an 
acquisition work force program that is focused on recruiting, training, 
and retaining a cadres of acquisition professionals in multiple 
disciplines. We recognized the need for sound business processes by 
publishing the Homeland Security Acquisition Regulation and Guidebook 
and have instituted internal controls for our investments through our 
Acquisition Oversight Program which has been favorably reviewed by the 
Comptroller General at Congressional Direction. In the near future we 
will be publishing our Program Review processes to further define 
program internal controls just as we have done for the procurement and 
contracting portion of Acquisition Management. DHS is continuing to 
strengthen its policies and processes to institutionalize an 
acquisition framework that will provide a disciplined process that 
integrates planning, requirements, budgeting and acquisition.

 BUILD-UP AND GROWTH OF THE OFFICE OF THE CHIEF PROCUREMENT OFFICE AND 
                  THE OFFICE OF PROCUREMENT OPERATIONS

    In March 2003, there were seven contracting activities supporting 
legacy components: TSA, USCG, USSS, CBP, ICE, FLETC and FEMA. 
Supporting the newly established Department Headquarters was a single 
contracting officer detailed to DHS Headquarters to personally handle 
and coordinate procurement requests from all newly established offices 
within Headquarters, including the newly formed Science and Technology 
Directorate (S&T), the Information Analysis and Infrastructure 
Protection (IAIP) Directorate, and the Border and Transportation 
Security (BTS) Directorate. The first Chief Procurement Officer, Greg 
Rothwell, came on board in the summer of 2003.
    In fiscal year 2004, the OCPO began defining the specific functions 
of policy and oversight, as well as established the Office of 
Procurement Operations (OPO). As the newest DHS contracting activity, 
OPO had the responsibility to support the contracting requirements of 
the DHS Headquarters and any other organization that did not have its 
own contracting activity. OPO reports directly to the CPO while the 
other contracting activities report through their respective 
component's chain of command while receiving their Procurement and 
Contracting authority from the OCPO. In fiscal year 2004, OCPO had only 
four employees while the entire Department employed 603 GS-1102 
contracting specialists. By the end of fiscal year 2005, OCPO had grown 
to 30 staff members performing procurement policy and oversight 
functions, to include grants oversight, competitive sourcing oversight, 
strategic sourcing and e-business initiatives and had added another 
function in support of acquisition work force management. In fiscal 
year 2007, OCPO established the Acquisition Oversight Division, 
dedicated to assessing the Department's procurements and acquisition 
programs. In fiscal year 2008, as the quantity and complexity of 
programs supporting DHS missions continued to increase, the need to 
evolve and establish additional functions within OCPO became necessary. 
OCPO established two new divisions to support critical acquisition 
functions, the Acquisition Program Management Directorate (APMD) and 
the Cost Analysis Division (CAD). APMD and CAD provide essential 
competencies that are core to the infrastructure of the Department's 
acquisition program. In addition to policy and oversight of their 
respective functional areas, the missions of APMD and CAD include 
providing outreach support to the various program offices to ensure 
sound program management principles are being applied to the programs.
    OCPO recognizes a successful acquisition program is more than 
policy and oversight, it requires a talented work force. Therefore, 
another priority of our acquisition framework is to improve our ability 
to attract and retain needed resources. Currently, there are more than 
1,000 contract specialists across the Department and we continue to 
recruit candidates at all grade levels. However, one of the most hard-
to-fill occupational series within the Federal Government is the 1102 
contracting series. The great demand far exceeds the number of 
qualified mid-level and senior level contracting professionals. As this 
testimony is being prepared there are 1,432 vacancy announcements for 
the 1102 job series across the Federal Government. At DHS, our targeted 
efforts include open and continuous job vacancy announcements at all 
grade levels, GS-9 through GS-15; aggressive use of the Department's 
direct-hire authority for the 1102 contracting series; expansive use of 
the OCPO's Acquisition Professional Career Program, and the use of re-
employed annuitants to serve as mentors to our acquisition interns, in 
training and in oversight. Many of the individuals we are hiring, from 
our new interns to our seasoned professionals, appreciate the 
importance of DHS' mission and want to protect our homeland as much as 
those individuals with me today.
    The same attention given to the recruitment of staff is being 
directed to the retention of our existing staff. Our contracting 
organizations are committed to providing their employees with the 
tools, developmental opportunities, and workplace flexibilities 
inherent to ``best places to work.'' For example, the Head of 
Contracting Activity (HCA) of OPO instituted a tuition assistance 
program, an annual employee satisfaction survey, an exit survey, and 
structured rotational/development work assignments. Other initiatives 
are being finalized that include expanded alternate work schedule 
options and tele-commuting options. Similar programs and initiatives 
are being implemented across the Department.
    As OCPO has concentrated on our acquisition work force and 
processes, the operational contracting activities have been focused on 
procuring the goods and services required in support of their programs. 
As I mentioned earlier, our acquisition portfolio is diverse, ranging 
from small purchases to commercial items to complex, cutting-edge 
solutions. In many cases, key mission capabilities cannot be satisfied 
by commercial or non-complex procurements. Rather, these capabilities 
will come from solutions derived from developmental efforts at the 
initial stage of the acquisition lifecycle. In these situations, the 
program assesses alternatives and performs demonstrations to determine 
if the solution is effective and worthy of continued investment. For 
these reasons, OCPO is implementing an acquisition framework that 
establishes policies and procedures to enable the Department to better 
ensure good investment and business decisions. Over the past 6 months, 
the Acquisition and Program Management Division within OCPO has 
collaboratively worked with the representatives from across the 
Department to develop the revised Acquisition Management framework that 
will provide the governance of our investment programs. This effort, 
combined with a revised Requirements process, integrated together, will 
form the foundation of the investment decision process. Once a 
requirement is identified, validated and resourced, the program will be 
subject to reviews at critical decision points to ensure continued 
investment in the program is in the best interests of the Government.
    Earlier this year, the CPO, Tom Essig, identified his top 
priorities for fiscal year 2008. While we have made significant 
progress on all three priorities, more remains to be done. We are 
committed to the Department's acquisition community to be one of that 
looks toward achieving excellence in what everything we do. The CPO 
will retain the following priorities as the Department advances into 
fiscal year 2009.

                  PRIORITY NO. 1: QUALITY CONTRACTING

    We need to make business decisions that enable us to accomplish our 
mission, while also being good stewards of taxpayer dollars. Within the 
OCPO, we are developing and implementing a policy and oversight 
framework that will facilitate the Department's ability to achieve this 
objective.
    We recognize that competition is good for both Government and 
industry. For this reason OCPO established in June 2007, the DHS 
Competition and Acquisition Excellence Award Program as an on-going 
program whereby Component HCAs are invited to provide the DHS 
Competition Advocate with nominations citing team or individual 
accomplishments in promoting and achieving competition and/or use of 
innovative and best practices. Competition advocacy and the use of 
innovative and best acquisition practices are a means of strengthening 
acquisition management. It provides greater value products and 
services, reduces risk, and is an underlying objective of the 
Secretary's goal to strengthen and unify DHS operations and management. 
This program was established as a means of motivating and recognizing 
individual and team accomplishments and sharing best practices in 
promoting and achieving competition, realizing cost savings/cost 
avoidance, and/or implementing improved acquisition practices. There 
were 13 efforts recognized for their fiscal year 2007 accomplishments. 
It is estimated that the Department's cost savings/avoidance was more 
than $5.2 million. These achievements in promoting competition have 
long-term effects that result in improvements to the Department's 
investment review processes and the quality of our program/project 
management. In a July 18, 2008 memorandum to Agency and Department 
Chief Acquisition Officers, the Office of Federal Procurement Policy 
cited the DHS Competition and Acquisition Excellence Awards Program as 
an example for agencies considering establishment of recognition 
programs.
    Another important aspect of making good business decisions involves 
the role of the Office of Small and Disadvantaged Business Utilization 
(OSDBU) to assist and counsel all types of small businesses (including 
veteran-owned small business, service-disabled veteran-owned small 
business, HUBZone small business, small disadvantaged business, and 
women-owned small business concerns) on procedures for contracting with 
the Department of Homeland Security. Our goal is to help small 
businesses by fostering an environment where these firms can compete 
for a fair share of DHS contracts and subcontracts. Through our 
efforts, we are able to support the OCPO by engaging the cooperation of 
all members of the DHS team (senior management, contracting officers, 
program managers, and small business specialists) to work together. The 
OSDBU works closely with the DHS procurement offices to identify 
significant procurement opportunities for small business participation; 
participates in an extensive outreach program; maintains a robust small 
business procurement assistance web site at www.dhs.gov/
openforbusiness; and works closely with SBA senior management to ensure 
all aspects of small business issues are reviewed and addressed to the 
benefit of all parties. In fact, the small business program managers 
and specialists are very active in communicating with industry, hosting 
or participating in more than 75 vendor sessions in fiscal year 2008 
alone.
    I am very proud to report that the Small Business Administration 
(SBA) has just notified DHS that it will receive its second consecutive 
``green'' on the Small Business Procurement Scorecard; recognizing the 
efforts of not only the OSDBUs, but the acquisition community for its 
efforts in achieving various small business and socio-economic goals.

               PRIORITY NO. 2: QUALITY PROGRAM MANAGEMENT

    In order to deliver the capabilities to meet DHS' mission on 
schedule and within budget, we are working to strengthen program 
management, including related functions such as cost analysis, 
logistics, systems engineering, and test and evaluation. Our goal is to 
make certain we have the policies, processes, and skilled people in 
place to effectively manage our programs and ensure the successful 
achievement of our mission objectives. During the past year, we 
established a core group within OCPO and partnered with the Defense 
Acquisition University and the Homeland Security Institute to ensure we 
have the skills and experience necessary to assess the status of DHS' 
acquisition programs and put policies and procedures in place to 
improve the management of our acquisition programs. We are also working 
to ensure that our program management teams are appropriately staffed 
and trained. The Program Management Council, chaired by APMD and 
consisting of acquisition professionals from across DHS, has been 
established and meets regularly to discuss policies, procedures, and 
current issues affecting Government acquisition.
    As previously described, the Acquisition Program Management 
Division (APMD) develops, implements, and manages Departmental 
acquisition policies and processes, in parallel with providing in-
process support to the DHS components in their acquisition efforts. 
This division developed and implemented multiple initiatives that 
significantly improve DHS acquisition and program management policy and 
processes. In a short time, this division has made great strides making 
significant operational improvements or notable innovation in support 
of the Department's missions. This division has completed a complete 
revamping of the DHS acquisition process. They have revised a 
management directive to establish a new process to be followed by all 
significant acquisition programs. This effort significantly improves 
the Department's ability to provide effective management oversight at 
key decision points throughout a program's lifecycle.
    At the request of DHS Leadership, the APMD developed and executed 
``QuickLooks'' during the period August-December 2007. These QuickLooks 
took a snapshot of selected Level 1 DHS programs and examined the 
Departmental acquisition polices and procedures used during their 
existing lifecycle. This was the first ``cross-cutting'' look taken at 
a top level of the DHS Acquisition portfolio. The findings provided the 
programs and components with an outside, expert look at the state of 
execution of their programs and helped to identify needed changes in 
the acquisition oversight management process. This division has jump-
started the Investment Review Boards (IRB) by introducing a more 
streamlined process of operation. As a result, more focused and timely 
IRBs are held in either physical or virtual venues at the Under 
Secretary for Management or Deputy Secretary level as appropriate.
    APMD also has developed a clear and practical guide for creating 
acquisition program baselines (APB) that provide meaningful content and 
strong programmatic documentation. This organization has provided 
expertise to a number of significant programs to strengthen their 
APB's. Last, but not least, a new Periodic Reporting System (nPRS) has 
been selected and is currently in a pilot phase. This is a web-hosted 
reporting system that allows program managers and their leadership 
quick access to meaningful information on a program's metrics, 
condition, and current issues. This system is a collaborative effort 
between the Chief Information Officer and the CPO leadership.
    The Acquisition Oversight Division has the responsibility for 
ensuring the integrity of DHS's acquisition process through the 
oversight of all acquisitions that support DHS, including financial 
assistance programs (grants), strategic sourcing programs, and 
competitive sourcing programs. A key part of carrying out this 
responsibility is conducting effective oversight reviews to verify the 
integrity of DHS procurement practices. In early 2006, my office set a 
goal of completing baseline procurement management reviews for all nine 
components by the end of fiscal year 2008. In July 2008, the 
acquisition oversight division had completed the field work for all 
nine components, had issued final reports for six of those components, 
and was on schedule to issue the final reports for the remaining three 
components by the end of fiscal year 2008. These baseline reviews will 
serve as the foundation for future oversight reviews by providing: (a) 
A listing of best practices for distribution/consideration by the 
components; (b) identifying systemic issues, recommendations, and 
action plans across components; and, (c) a basis for conducting 
component specific risk assessments and tailoring future review 
programs to focus on key issues identified in past reviews (while 
reducing coverage in areas where issues have not been found in the 
past). The accomplishment of these baseline reviews provides the 
oversight division with a strong underpinning of lessons learned that 
can be built on as the oversight function continues to assure integrity 
in DHS procurement.

                     PRIORITY NO. 3: QUALITY PEOPLE

    A key enabler of our ability to make good business deals is a 
highly skilled and motivated acquisition work force. In fiscal year 
2008, we are focusing on four acquisition work force initiatives: 
Establishment of an acquisition intern program; identification of 
certification and training requirements for all acquisition functional 
areas; a centralized acquisition training fund; and centralized 
recruitment and hiring of acquisition personnel. I greatly appreciate 
the funding we received in fiscal year 2008 in support of these 
initiatives.
    The Acquisition Professional Career Program (APCP) serves as the 
pipeline for providing talented, trained acquisition personnel 
procuring goods and services in support of securing the homeland. The 
APCP Component working group has made significant progress in 
recruiting and determining needs across Component organizations. Over 
40 percent of the DHS procurement work force is approaching retirement 
eligibility. In fact, more than half of those are currently eligible 
for retirement (over age 55 with 30 years of service). Current and 
continuing level of procurement professional employment is being 
sustained by an aging work force continuing to work even when eligible 
for retirement. The working group's efforts have resulted in the 
successful placement of 48 highly qualified procurement interns across 
the Department with plans for an additional 150 interns through fiscal 
year 2010. Once a participant graduates from the 3-year program, DHS 
will realize immediate results in its documented acquisition staffing 
shortfalls.
    The success of this effort will position the Department to resolve 
potential critical procurement skill gaps. DHS hiring and attrition 
rates are in line with other non-DoD agencies, meaning we are competing 
with other agencies for scarce resources. Preliminary indications from 
our APCP indicates a quality work force can be grown and maintained as 
the program matures and expands, and this will increase our ability to 
better compete for the journeyman-level resources needed to ensure 
quality contracting and quality acquisition. The result will be a 
highly skilled work force effectively and efficiently executing the DHS 
acquisition mission. The working group's success in seamlessly 
absorbing 50 interns has further led to the expansion of the program 
beyond procurement and into other acquisition series. This is a key 
accomplishment. The tremendous growth of Federal and DHS acquisition-
related actions combined with a stagnant number of Contracting 
Specialists would otherwise bring the availability and viability of the 
DHS acquisition work force in question.
    While we have strengthened many aspects of our acquisition program 
over the first 5 years of the Department, we will continue to seek 
improvements in our processes and provide our acquisition professionals 
the tools they need to both meet our mission and achieve acquisition 
excellence.
    Thank you, Mr. Chairman for your interest in and continued support 
of the DHS Acquisition Program.
    Thank you for the opportunity to testify before the subcommittee 
about the DHS acquisition program. I am glad to answer any questions 
you or the Members of the subcommittee may have for me.

    Mr. Carney. Thank you for your testimony, Mr. Gunderson.
    I now recognize Mr. Taylor to summarize his statement for 5 
minutes.

    STATEMENT OF JAMES L. TAYLOR, DEPUTY INSPECTOR GENERAL, 
                DEPARTMENT OF HOMELAND SECURITY

    Mr. Taylor. Good afternoon, Mr. Chairman, Mr. Rogers, 
Chairman Thompson and Members of the subcommittee. I am Jim 
Taylor, deputy inspector general for the Department of Homeland 
Security, and I appreciate the opportunity to come before you 
today to talk about the issues of acquisition management and 
challenges the Department faces.
    Once, when asked about an opponent's strategy in the ring, 
Mike Tyson replied, ``Everyone has a game plan until you are 
hit in the mouth.'' Even in the best of circumstances, the pace 
of change at DHS would be that punch in the mouth that would 
test any game plan. However, in our work regarding DHS's 
contracting practices, common themes and risks have emerged, 
primarily the lack of sound game plans, the dominant influence 
of expediency, poorly defined requirements, and inadequate 
oversight that contributed to the ineffective or inefficient 
result and increased cost.
    DHS has not consistently balanced the urgency of meeting 
mission needs with sound business practices, leaving DHS and 
the American taxpayer vulnerable to spending millions of 
dollars in unproductive homeland security investments. DHS 
acquisition practices must be stringent enough to meet sound 
business requirement, yet flexible enough to meet current 
needs.
    The Department continues to face challenges associated with 
implementing an acquisition function it has not fully 
integrated. Each component had shared responsibility for the 
acquisition functions with the chief procurement officer. 
Without the appropriate policies in place, this structure can 
create ambiguity about who is accountable for acquisition 
decisions. In addition, the Department does not possess an 
accurate view of the activities of components. In a recent 
report, we found that as a result of separate procurement and 
management systems at the Department at component levels, DHS 
lacks insight into the status of procurement activities or even 
the qualifications of the contracting staff responsible for the 
success of these projects.
    The lack of adequate oversight has not been found solely at 
the Department level. DHS's components have suffered from the 
desire for expediency over sound business practices. We have 
reported on TSA's lack of oversight of its billion-dollar 
contract to train airport screeners and the U.S. Coast Guard's 
inability to manage its $24 billion Deepwater contract, both of 
which were initiated prior to the creation of DHS, which 
followed the same theme of a sense of urgency and lack of 
oversight capability.
    In 2006, we alerted the Department of significant oversight 
weaknesses in the SBInet program. Last week, we released a 
report on FEMA's management of $3.2 billion in noncompetitive 
contracts to provide comprehensive project management services 
for temporary housing units following Hurricane Katrina. We 
determined that the combination of deficiencies in acquisition 
planning and contract oversight led to waste of Government 
funds and questioned costs of $46 million.
    We observed a correlation between deficient procurement 
practices and contract management procedures and uncontrolled 
growth in the amount of funds obligated and expended under the 
contracts. Both our office and GAO have recommended that DHS 
provide the Office of the Chief Procurement Officer sufficient 
resources and authority to enable effective Department-wide 
oversight of acquisition policies and procedures. The OIG has 
also made specific recommendations to components regarding the 
staffing and training of their procurement functions.
    However, we are seeing areas where some progress is being 
made. DHS's executive leadership has enhanced the role of the 
Procurement Review Board for major activities. The Department 
and components have significantly increased the number of 
acquisition staff positions, and the Department is establishing 
an acquisition internship program, among other initiatives.
    In addition, the Coast Guard has restructured its 
procurement oversight function and completed the integration of 
three separate accounting systems into a single acquisition 
construction and improvement data set. FEMA has more than 
tripled the number of its acquisition staff.
    It is difficult to overstate the complexity and importance 
of the task assigned to the Department of Homeland Security, 
and little disagreement exists about the need for our Nation to 
protect itself immediately against the range of threats, both 
natural and manmade, that we face. At the same time, the 
urgency and complexity of the Department's mission create an 
environment in which many programs have acquisitions with a 
high risk of cost overruns, mismanagement or failure. A 
balanced approach between urgency and good business practices 
is most likely to result in the right products and services at 
the right times for the right prices.
    The need to secure the homeland and strong internal 
controls and accountability need not be mutually exclusive. For 
our part, Mr. Chairman, our annual report on management 
challenges has identified acquisition as a key area of concern. 
Last year, we also initiated a series of scorecards identifying 
the Department's progress on those management challenges. The 
acquisition scorecard was the very first one we released. It is 
the Inspector General's intention to continually and annually 
update these scorecards and keep track of the Department's 
progress.
    Mr. Chairman, this concludes my prepared remarks, and I 
would be pleased to answer any questions you may have.
    [The statement of Mr. Taylor follows:]

                 Prepared Statement of James L. Taylor
                           September 17, 2008

    Good afternoon, Mr. Chairman and Members of the subcommittee. I am 
James L. Taylor, Deputy Inspector General for the Department of 
Homeland Security. Thank you for the opportunity to discuss the 
acquisition management challenges facing DHS.
    The Department of Homeland Security is charged with extremely 
challenging and critical missions; be it reducing illegal immigration, 
preventing dangerous individuals and materials from entering our 
country, protecting our waterways, ensuring safe travel by air and 
rail, or working in collaboration with States and localities to prepare 
for, and respond to natural disasters, to name just a few. Contracting 
for goods and services is absolutely critical to achieving these 
missions and consumes nearly 40 percent of the Department's annual 
budget of $47 billion. As a result, effective acquisition management is 
fundamental to DHS' ability to accomplish its mission.
    Acquisition management is not just awarding a contract, but an 
entire process that begins with identifying a mission need and 
developing a strategy to fulfill that need through a thoughtful, 
balanced approach that considers cost, schedule, and performance. A 
successful acquisition process requires an effective acquisition 
management infrastructure. This is especially true when complex and 
large dollar procurements are involved.
    Today, I would like to highlight acquisition management challenges 
facing the Department in the following areas:
   Organizational alignment and leadership;
   Policies and processes;
   Financial accountability;
   Acquisition work force;
   Knowledge management and information systems; and
   Balancing urgency and good business practices.
    These interrelated elements are essential to an efficient, 
effective, and accountable acquisition process.

                ORGANIZATIONAL ALIGNMENT AND LEADERSHIP

    DHS was created from components of 22 agencies of the Federal 
Government. In their transition into DHS, seven agencies retained their 
procurement functions, including U.S. Coast Guard (USCG), Federal 
Emergency Management Agency (FEMA), and Transportation Security 
Administration (TSA). The seven procurement offices, called Heads of 
Contracting Activities, retained the expertise and capability they had 
before creation of DHS, with staff size that ranged from 21 to 346 
procurement personnel. To manage Department-wide procurements and 
provide procurement services for the remaining components, DHS created 
an eighth office, the Office of Procurement Operations.
    DHS also established a Chief Procurement Officer reporting directly 
to the Under Secretary for Management. Each component head shares 
responsibility for the acquisition function with the DHS Chief 
Procurement Officer. As a result of this dual accountability, the Chief 
Procurement Officer has used collaboration and cooperation with the 
components as the primary means of managing DHS-wide acquisition 
oversight.
    The Department continues to face challenges associated with 
implementing an acquisition function that is not fully integrated. The 
structure of DHS' acquisition function creates ambiguity about who is 
accountable for acquisition decisions. Within FEMA, for example, we 
found that the agency's acquisition function is viewed more as a 
support function than as a partner, and it is not aligned 
organizationally to ensure efficiency and accountability.
    DHS' executive leadership has made modest progress in ensuring the 
acquisition program achieves the organizational alignment needed to 
perform its functions. One area of improvement is the increased 
communication by acquisition leadership to inform staff about the role 
and importance of their mission to the Department. The atmosphere for 
collaboration between DHS and its component agencies on acquisition 
matters has also improved.

                         POLICIES AND PROCESSES

    DHS has made modest progress in developing policies and processes 
to ensure that components comply with regulations, policies, and 
procedures to achieve Department-wide goals. DHS has developed and 
begun to implement an acquisition oversight plan that incorporates 
policy, internal controls, and other elements of an effective 
acquisition function. While it is too early to assess the acquisition 
oversight plan's overall effectiveness, the initial implementation has 
helped the components prioritize actions to address identified 
weaknesses.
    An effective acquisition function includes processes and procedures 
that ensure contracts are written with specific measurable criteria 
against which the contractor's performance may be evaluated. DHS 
components have struggled to implement this important practice, even 
before DHS stood up. For example, in August 2002 TSA awarded a $1 
billion performance-based contract for information technology managed 
services to Unisys Corporation, using a broad statement of objectives 
to describe requirements rather than a specific statement of 
requirements. At the time of our review,\1\ TSA had expended 83 percent 
of the contract ceiling in less than half of the contract period and 
had not received many essential deliverables that were critical to 
airport security and communications, such as high-speed operational 
connectivity. Many airports were operating with archaic telephone 
systems, dial-up internet, ineffective e-mail connectivity, and land 
mobile radios that were not interoperable with other law enforcement 
agencies and did not have reception throughout the airport.
---------------------------------------------------------------------------
    \1\ Transportation Security Administration's Information Technology 
Managed Services Contract, OIG-06-23, February 2006.
---------------------------------------------------------------------------
    Also on this contract, TSA used service requests, which sometimes 
lacked statements of work with delivery due dates and acceptance 
criteria. As a result, TSA had no assurance that costs were fair and 
reasonable; the contractor was sometimes allowed to perform 
unauthorized contract work; and TSA did not effectively manage its 
project priorities.

                        FINANCIAL ACCOUNTABILITY

    Financial accountability means having sound financial systems to 
provide credible, reliable, and accurate information that can: (1) 
Ensure that the agency meets its financial obligations; (2) enhance 
strategic acquisition decisions; and (3) enable effective evaluation 
and assessment of acquisition activities. DHS has made limited progress 
in ensuring financial oversight and accountability within the 
acquisition function. The acquisition and finance offices have not 
successfully partnered on acquisition planning and strategic 
decisionmaking. DHS has numerous and persistent issues with inadequate 
internal controls and data verification. Improper payments have been 
made, and there are few checks on data once it is recorded in the 
system. This problem is exacerbated by the use of multiple, 
nonintegrated information technology systems across the Department. 
Without a reliable data system, it has been very difficult for the 
financial office to make an impact on the broader acquisition process.

                         ACQUISITION WORKFORCE

    Successful acquisition efforts depend on agency and management 
valuing and investing in the acquisition work force. The capabilities 
of DHS' acquisition work force will determine, to a great extent, 
whether major acquisitions fulfill DHS' urgent and complex mission 
needs. Contracting officers, program managers, and Contracting Officer 
Technical Representatives (COTRs) make critical decisions on a daily 
basis that increase or decrease an acquisition's likelihood of success. 
It is critical that DHS devote adequate resources to ensure that it has 
the right staff, in the right number, with the right skills, in the 
right places, to accomplish its mission effectively.
    Both our office and the Government Accountability Office (GAO) have 
reported that the Office of the Chief Procurement Officer needs more 
staff and authority to carry out its oversight responsibilities. GAO 
recommended that DHS provide the Office of the Chief Procurement 
Officer sufficient resources and enforcement authority to enable 
effective, Department-wide oversight of acquisition policies and 
procedures. We made a similar recommendation.
    Our recent audit of DHS' acquisition work force,\2\ confirmed that 
DHS cannot provide reasonable assurance that qualified acquisition 
personnel are managing acquisitions. Federal policy requires each 
agency to collect, maintain, and utilize information to ensure the 
effective management of the acquisition work force. However, neither 
DHS, USCG, TSA, nor Customs and Border Protection (CBP) have complete, 
reliable information and supporting documentation about their 
acquisition personnel or their assignments. The majority of the 
acquisition training and certification files we reviewed were 
incomplete and did not have supporting training or certification 
documentation. Furthermore, major differences existed between the DHS 
Acquisition Workforce Development Office database and acquisition work 
force databases maintained by the components.
---------------------------------------------------------------------------
    \2\ Acquisition Workforce Training and Qualifications, OIG-08-56, 
May 2008.
---------------------------------------------------------------------------
    This audit also found that DHS had problems with policies and 
procedures associated with the acquisition work force. Management 
directives for the Federal acquisition certification programs related 
to contracting officers and program and project managers were not 
revised timely to reflect current Federal requirements. Additionally, 
DHS has not established a policy on the development, selection, 
assignment, and management of program managers, and certification 
levels for program and project managers were inconsistent among various 
management directives.
    To its credit, DHS has made some progress in building and 
maintaining a skilled acquisition work force. Personnel budget 
increases have allowed the Department to fill many acquisition staff 
positions. GAO reported in April 2008 that approximately 61 percent of 
the minimum required staff are in place. However, this constitutes only 
38 percent of the optimal level of contract specialists. Further, 
Office of Personnel Management data indicates that more than 40 percent 
of DHS' contracting officers will be eligible to retire within the next 
5 years. Competition with other departments for acquisition personnel 
is intense. To mitigate these circumstances, DHS plans to implement an 
acquisition internship program that will bring in junior staff. 
Additionally, the Office of the Chief Procurement Office created a 
training program to increase the pool of certified program managers, 
and has also undertaken an outreach program to involve DHS component 
staff to assist in acquisition oversight.
    Components within the Department such as USCG and CBP's Secure 
Border Initiative have initiatives to develop and retain a work force 
capable of managing complex acquisition programs, but they are still 
relying on support contractors to fill key positions. Until a fully 
trained acquisition work force is developed, it will be difficult to 
achieve further progress needed for an efficient, effective, and 
accountable acquisition function.

              KNOWLEDGE MANAGEMENT AND INFORMATION SYSTEMS

    The Department's acquisition-related information systems are 
generally not integrated, contain unreliable data, and lack adequate 
internal controls. As a result, the acquisition program cannot 
effectively provide information to its stakeholders and does not have 
the tools necessary for planning or monitoring its transactions. Many 
DHS components maintain their legacy contract writing systems and DHS 
lacks integration between contract writing and contract management 
systems. Although DHS has selected PRISM as its standard contract 
writing system, the Department-wide rollout is behind schedule. 
Integration and data accuracy problems will continue to exist until all 
components migrate to the same contract writing system. DHS also needs 
to improve the tracking of its acquisition work force training and 
qualifications to ensure work force development and appropriate 
assignment to acquisition projects.
    DHS has made some progress in improving the integration of its 
information systems. For example, the USCG has completed the 
integration of three separate accounting systems into a single 
Acquisition, Construction, and Improvement data set that is usable by 
all Coast Guard acquisition personnel as part of their Blueprint for 
Acquisition Reform.

             BALANCING URGENCY AND GOOD BUSINESS PRACTICES

    Due to our current homeland security vulnerabilities, DHS tends to 
focus its acquisition strategies on the urgency of meeting mission 
needs, rather than balancing urgency with good business practices. 
Excessive attention to urgency without good business practices leaves 
DHS and the taxpayers vulnerable to spending millions of dollars on 
unproductive homeland security investments. Acquisitions must provide 
good value, because funds spent ineffectively are not available for 
other, more beneficial uses.
    Common themes and risks have emerged from our audits and reviews of 
individual DHS contracts, primarily the dominant influence of 
expediency, poorly defined requirements, and inadequate oversight that 
contributed to ineffective or inefficient results, and increased costs. 
DHS has not consistently balanced the urgency of meeting mission needs 
with good business practices, leaving DHS and the taxpayers vulnerable 
to spending millions of dollars on unproductive homeland security 
investments. Expediting program schedules and contract awards limits 
time available for adequate procurement planning and development of 
technical requirements, acceptance criteria, and performance measures. 
This can lead to higher costs, schedule delays, and systems that do not 
meet mission objectives.
    For example, as a result of the September 11, 2001 terrorist 
attacks, TSA faced a formidable challenge to hire a Federalized 
screener work force, while concurrently standing up an agency within a 
1-year congressional mandate. Although TSA successfully recruited more 
than 56,000 airport screeners within the mandated period, success came 
at a high cost. The recruitment contract costs grew more than 600 
percent over a 10-month period. In response to congressional concerns 
over press reports of perceived wasteful Government spending by TSA's 
recruitment contractor, NCS Pearson, we audited TSA's management and 
oversight of the recruitment program.\3\
---------------------------------------------------------------------------
    \3\ Review of the Transportation Security Administration's 
Management Controls Over the Screener Recruitment Program, OIG-06-18, 
December 2005.
---------------------------------------------------------------------------
    As a relatively new agency, TSA did not have the staff or 
infrastructure necessary to adequately plan and manage contracts. As a 
result, TSA made critical decisions without the benefit of sound 
acquisition planning or adequate cost control, significantly increasing 
costs. The establishment of temporary assessment centers, delays, and 
revisions in issuance of the airport Federalization schedule and 
staffing requirements, and higher than expected applicant rejection 
rates significantly impacted the costs to establish and operate 
assessment centers. By the contract's end, NCS Pearson had assessed 
more than nine times the number of screeners originally estimated in 
less than half the time originally allotted. Consequently, the 
increased candidate volume necessitated larger and more accessible 
assessment centers. All of these factors contributed to the escalation 
of contract costs from the original estimate of $104 million to the 
settlement amount of $742 million.
    Programs developed under a sense of urgency sometimes overlook key 
issues during program planning and development of mission requirements. 
An over-emphasis on expedient contract awards may also hinder 
competition, which frequently results in increased costs or improper 
sole-source contracts. For example, CBP did not comply with Federal 
regulations when it awarded Chenega Technology Services Corporation a 
sole-source contract under an incorrect industry classification 
code.\4\ Had CBP used the correct classification, the contractor would 
have been ineligible for the sole source award. This action prevented 
eligible small businesses from competing for a nearly $475 million 
contract and might not have provided the best value for the Government.
---------------------------------------------------------------------------
    \4\ Customs and Border Protection Award and Oversight of Alaska 
Native Corporation Contract for Enforcement Equipment Maintenance and 
Field Operations Support, OIG-08-10, October 2007.
---------------------------------------------------------------------------
    In another example, in 2005 FEMA issued noncompetitive Individual 
Assistance--Technical Assistance Contracts to four large contractors in 
2005: Fluor Enterprises, Inc., Shaw Group, CH2M Hill Constructors, 
Inc., and Bechtel National, Inc. These contractors were tasked to 
provide and coordinate comprehensive project management services. Our 
recently released report \5\ focused on the contractor costs incurred 
by FEMA for the delivery, installation and maintenance of temporary 
housing units for the Hurricane Katrina relief effort on group, 
commercial and private sites. We determined that the combination of 
deficiencies in acquisition planning and contract oversight led to 
waste of Government funds and questioned costs of $45.9 million of the 
$3.2 billion contract obligation. We observed a correlation between 
deficient procurement practices and contract management procedures, and 
uncontrolled growth in the amount of funds obligated and expended under 
the contracts. FEMA's ability to properly inspect and accept goods and 
services was hampered because of: (1) The number and complexity of 
contractor invoices it received; (2) inadequate FEMA staffing; and, (3) 
unclear contractor invoices. Of the $45.9 million of questioned costs, 
$37.2 million or 81 percent related to inspection and acceptance of 
goods and services.
---------------------------------------------------------------------------
    \5\ Hurricane Katrina Temporary Housing Technical Assistance 
Contracts, OIG-08-88, August 2008.
---------------------------------------------------------------------------
    We recognize that FEMA has already begun the process of improving 
its operation and controls. New competitively bid contracts were 
awarded in August 2006 and FEMA has been working to improve policy and 
procedures. It is well understood that one of FEMA's biggest challenges 
during disaster relief efforts is to balance the need to quickly 
provide assistance to victims while ensuring accountability to protect 
against waste, fraud, and abuse. However, FEMA should ensure contract 
terms are clear and enforced.
    Although there were established procedures to inspect goods and 
services, and perform invoice reviews, amounts invoiced by the 
contractors needed to include adequate cost details to allow FEMA to 
link invoices to specific contractor activities under the statement of 
work. We question how FEMA determined that the amounts invoiced were 
allowable and reasonable. Overall, an adequate number of staff should 
be employed to: (1) Sufficiently plan acquisitions; (2) monitor 
contracts and hold contractors compliant to the terms of the contract; 
and (3) inspect and accept services rendered.
    Numerous opportunities exist for DHS to make better use of good 
business practices, such as well-defined operational requirements and 
effective monitoring tools that preserve the Government's ability to 
hold poorly performing contractors accountable.
    Suspension and debarment are the most serious methods available to 
hold Government contractors accountable for failed performance and to 
protect the Government's interests in future procurements. To ensure 
the Government has the option of using these methods, along with other 
tools to hold contractors accountable, the Government must use good 
business practices to lay the groundwork from the very beginning of the 
acquisition process. That is, contracts must specify precisely expected 
outcomes and performance measures, and the Government must properly 
oversee contractor performance. Without these basic provisions, the 
Government will have no basis to assert that a contractor failed to 
perform, and thus, no basis to pursue suspension and debarment to 
protect the taxpayers in future procurements.
    Little disagreement exists about the need for our Nation to protect 
itself immediately against the range of threats, both natural and 
manmade, that we face. DHS has been given a difficult and complex task 
in addressing these threats. However, we should not allow expediency to 
completely and consistently overrule sound business practices. When 
that happens, we fail to get the right products and services at the 
right times for the right prices.

                       OUTLOOK AND OIG OVERSIGHT

    DHS can protect the public interest in major acquisitions. The 
long-run solutions include:
   Strong program and procurement offices;
   Clearly articulated program goals;
   Defined program technical requirements, performance 
        measures, and acceptance terms;
   Well-structured contracts; and
   Thorough cost and performance oversight.
    In the near term, DHS can mitigate risks and limit Government's 
exposure through such actions as the following:
   Writing shorter-term contracts with smaller, incremental 
        tasks;
   Using contract vehicles that better share risk between 
        Government and vendor; and
   Ensuring that the Government retains negotiating power with 
        decision points and options.
    For our part, the OIG will continue a vigorous audit and 
investigation program to identify DHS acquisition vulnerabilities and 
recommend swift, cost-effective improvements. Acquisition management is 
and will continue to be a priority for my office. Our plan is to 
continue examining such cross-cutting acquisition issues as work force 
qualifications, competition, small and disadvantaged business 
utilization, and corporate compliance, in addition to individual 
projects such as Deepwater and the Secure Border Initiative.
    Mr. Chairman, this concludes my prepared statement. I will be 
pleased to answer any questions you or the Members may have.

    Mr. Carney. Thank you, Mr. Taylor.
    I recognize Mr. Hutton for 5 minutes.

STATEMENT OF JOHN P. HUTTON, DIRECTOR, ACQUISITION AND SOURCING 
          MANAGEMENT, GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Hutton. Chairman Carney, Ranking Member Rogers and 
Chairman Thompson of the full committee, I am pleased to be 
here today to discuss acquisition management at the Department 
of Homeland Security.
    As you know, the Nation's homeland security mission calls 
for some of the Government's most extensive and complex 
acquisitions. Therefore, improving the acquisition management 
has been an on-going challenge since DHS was established in 
2003.
    Based on prior work, we have identified three key 
performance areas for acquisition management: Assessing and 
organizing acquisition functions to meet the agency needs; 
developing clear and transparent policies and processes; and 
developing an acquisition work force to execute and oversee 
those acquisitions.
    While DHS has made some progress by taking steps to 
organize and assess the acquisition function, more needs to be 
done to create clear and transparent policies and processes for 
all acquisitions and to develop and sustain an acquisition work 
force.
    Today I would like to discuss two key areas needing 
improvement: acquisition planning and oversight. In doing so, I 
will highlight relevant functions drawn from our recent work on 
DHS's reliance on contractors and its use of interagency 
contracting and performance-based acquisitions for major 
investments.
    With regard to acquisition planning, we found that DHS does 
not systematically assess the risk in using contractors who are 
in a position to influence Government decisions, such as those 
that support budget preparations, policy development and the 
acquisition function. While contracting for such services can 
provide increased flexibility to fulfill immediate needs, it is 
critical that the Department understand and mitigate the risks 
inherent in those contracts to help ensure the Government does 
not lose control over accountability.
    Similarly, DHS's decisions to use interagency contracts 
were often based on the benefits of speed and convenience, not 
on planning and an analysis of alternatives as called for in 
the DHS guidance. Comprehensive guidance, training and sound 
criteria for selecting interagency contracts are needed to 
better ensure the Department gets the best value from those 
contracts.
    The use of performance-based acquisitions is another area 
where improved acquisition planning is needed. Earlier this 
year, we reported that four contracts related to eight major 
investments reviewed at three DHS components did not have well-
defined requirements or a complete set of measurable 
performance standards, or both, at the time of the contract 
award or the start of the work. These contracts experienced 
cost overruns, schedule delays, or they did not otherwise meet 
the performance expectations.
    I would now like to highlight our findings related to the 
need for improved oversight that help better ensure outcomes in 
acquiring services.
    Of particular concern is DHS's oversight of contractors who 
perform services that closely support inherently governmental 
functions. Federal regulations in policy state that when 
contracting for these types of services agencies need a 
sufficient number of qualified Government personnel to plan and 
oversee contractor activities to maintain control and 
accountability. However, for the nine cases we reviewed, the 
level of oversight provided did not always help ensure 
accountability for decisions or the ability to judge whether 
contracts were performing as required. We also found that DHS 
program officials and contracting officers were not aware of 
the Federal requirements for enhanced oversight for these types 
of services.
    Effective oversight has always been hindered by 
insufficient data on DHS acquisitions. Our review of the 
Department's use of interagency contracting and performance-
based acquisitions found that DHS does not systematically 
collect data on its use of these contracts to assess whether 
these methods are being properly managed or to assess costs, 
benefits or other outcomes of those acquisition methods.
    For example, with respect to interagency contracting, we 
found that DHS was not able to provide data on the amounts 
spent or the fees paid to other agencies for the use of their 
contracting services or vehicles. Without this information, DHS 
cannot assess whether the Department could achieve savings 
through another type of contracting vehicle.
    We similarly found that DHS does not have reliable data on 
performance-based acquisitions to facilitate required 
reporting, inform their decisions and analyze acquisition 
outcomes.
    Now on a more positive note, the CPO established the 
Department-wide acquisition oversight program in late 2005, 
designed to provide insight into component agencies' 
acquisitions and to disseminate successful acquisition 
management approaches throughout DHS. While this program is an 
important step toward improving contract processes and 
oversight, our work has found that the CPO continues to face 
challenges in maintaining the staffing levels needed to fully 
implement the program, and CPO's authority to ensure components 
to comply with the procurement oversight plan is unclear.
    In closing, improving acquisition outcomes has been an on-
going challenge since DHS was established in 2003. Our prior 
work has found that sound acquisition planning, including 
clearly defining your requirements, as well as ensuring 
adequate oversight, are hallmarks of successful acquisitions. 
While DHS has made some progress over the past 5 years, it is 
clear that much more needs to be done if it is to ensure that 
acquisitions meet the Government's needs.
    Mr. Chairman, this concludes my prepared statement, and I 
would be happy to respond to any questions that you or other 
Members of the subcommittee may have.
    [The statement of Mr. Hutton follows:]

                  Prepared Statement of John P. Hutton
                           September 17, 2008

                             GAO HIGHLIGHTS

    Highlights of GAO-08-1164T, a testimony before the Subcommittee on 
Management, Investigations, and Oversight, Committee on Homeland 
Security, House of Representatives.
Why GAO Did This Study
    Since it was created in 2003, the Department of Homeland Security 
(DHS) has obligated billions of dollars annually to meet its expansive 
homeland security mission. The Department's acquisitions support 
complex and critical trade, transportation, border security, and 
information technology investments. In fiscal year 2007, DHS spent over 
$12 billion on procurements to meet this mission including spending for 
complex services and major investments.
    Prior GAO work has found that while DHS has made some initial 
progress in developing its acquisition function since 2003, acquisition 
planning and oversight for procurement and major acquisitions need 
improvement. This testimony discusses GAO's findings in these areas and 
is based on GAO's body of work on acquisition management issues.
What GAO Recommends
    While GAO is making no new recommendations in the testimony, GAO 
has made numerous recommendations over the past several years to 
improve DHS's acquisition management. DHS has generally concurred with 
these recommendations, but actions still need to be taken to fully 
address them.

DEPARTMENT OF HOMELAND SECURITY.--PROGRESS AND CONTINUING CONCERNS WITH 
                         ACQUISITION MANAGEMENT

What GAO Found
    Recognizing the need to improve its acquisition outcomes, DHS has 
taken some steps to integrate disparate acquisition processes and 
systems that the component organizations brought with them when the 
Department was formed. However, we have reported that more needs to be 
done to develop clear and transparent policies and processes for all 
acquisitions, and to develop an acquisition work force to implement and 
monitor acquisitions.
    With regard to acquisition planning, DHS did not assess the risk of 
hiring contractors to perform management and professional support 
services that have the potential to increase the risk that Government 
decisions may be influenced by, rather than independent from, 
contractor judgments. Planning for services procured through 
interagency and performance-based contracting methods was also lacking. 
For example, DHS did not always consider alternatives to ensure good 
value when selecting among interagency contracts. Shortcomings in DHS's 
use of a performance-based approach for complex acquisitions included a 
lack of well-defined requirements, a complete set of measurable 
performance standards, or both, at the time of contract award or the 
start of work. Contracts for several investments we reviewed 
experienced cost overruns, schedule delays, or less than expected 
performance.
    Acquisition oversight also has consistently been identified as 
needing improvement. While the Chief Procurement Officer (CPO) has 
recently implemented a Department-wide oversight program, evaluations 
of the outcomes of acquisition methods and contracted services have not 
yet been conducted. Further, the CPO continues to face challenges in 
maintaining the staffing levels needed to fully implement the oversight 
program, and CPO authority to ensure that components comply with the 
procurement oversight plan remains unclear.



    Mr. Chairman and Members of the subcommittee: Thank you for 
inviting me here today to discuss the Department of Homeland Security's 
(DHS) progress and areas for improvement in managing acquisitions. Over 
the past several years, as DHS has been developing its acquisition 
function, it has spent billions of procurement dollars annually to meet 
its expansive homeland security mission. The Department's acquisition 
portfolio is broad and complex, supporting critical trade, 
transportation, border security, and information technology 
investments. In fiscal year 2006, more than 80 percent of DHS's 
procurement spending was for services, which can be more complex and 
require different approaches to acquire than purchases of goods. Our 
prior work has found that appropriate planning, structuring, and 
monitoring of acquisitions is critical to ensuring the services 
provided meet the Government's needs.\1\ The growing complexity of 
contracting for technically difficult and sophisticated services 
increases the challenges of setting appropriate requirements and 
effectively overseeing contractor performance. At the same time, other 
factors, such as pressure to get programs up and running, and 
technological challenges have impacted DHS's ability to achieve good 
acquisition outcomes.
---------------------------------------------------------------------------
    \1\ For example, GAO, Defense Acquisitions: Tailored Approach 
Needed to Improve Service Acquisition Outcomes, GAO-07-20 (Washington, 
DC: Nov. 9, 2006).
---------------------------------------------------------------------------
    My statement today is drawn from our body of work on DHS's 
acquisition management. I will discuss DHS's progress and areas for 
improvement in developing its acquisition function and DHS's 
acquisition planning and oversight. Specifically, I will highlight 
relevant findings from our work on contractors hired to perform 
management and professional support services, and the use of selected 
procurement methods, such as interagency contracting and performance-
based acquisitions. We conducted these performance audits in accordance 
with generally accepted government auditing standards. Those standards 
require that we plan and perform the audit to obtain sufficient, 
appropriate evidence to provide a reasonable basis for our findings and 
conclusions based on our audit objectives. We believe that the evidence 
obtained provides a reasonable basis for our findings and conclusions 
based on our audit objectives.

                                SUMMARY

    DHS has made some progress in acquisition management--recognizing 
the need to improve acquisition outcomes and taking some steps to 
organize and assess the acquisition function. However, we have reported 
that more needs to be done to develop clear and transparent policies 
and processes for all acquisitions and to develop an acquisition work 
force to execute and monitor acquisitions. Additionally, our work has 
found that acquisition planning and oversight for procurement and major 
acquisitions need improvement. With regard to planning, we found that 
DHS did not assess the risk of hiring contractors to perform 
professional and management support services that have the potential to 
increase the risk that Government decisions may be influenced by, 
rather than independent from, contractor judgments. For services 
procured through interagency contracting, we found acquisition planning 
was lacking. DHS did not always consider alternatives to ensure good 
value when selecting among interagency contracts. We have also 
identified a number of shortcomings in DHS's use of a performance-based 
approach for complex acquisitions. Earlier this year, we reported that 
contracts for eight major investments at Coast Guard, Customs and 
Border Protection (CBP), and the Transportation Security Administration 
(TSA) did not always have well-defined requirements, a complete set of 
measurable performance standards, or both at the time of contract award 
or the start of work, and that these contracts experienced cost 
overruns, schedule delays, or did not otherwise meet performance 
expectations. With regard to oversight, while the Chief Procurement 
Officer (CPO) has recently implemented a Department-wide oversight 
program, evaluations of the outcomes of acquisition methods and 
contracted services have not yet been conducted. The CPO continues to 
face challenges in maintaining the staffing levels needed to fully 
implement the oversight program, and CPO authority to ensure that 
components comply with the procurement oversight plan remains unclear.

                               BACKGROUND

    DHS has some of the most extensive acquisition needs within the 
Federal Government. In fiscal year 2007, DHS obligated about $12 
billion to acquire goods and services ranging from the basic goods and 
services Federal agencies purchase, such as information technology 
equipment and support, to more complex and unique acquisitions, such as 
airport security systems and Coast Guard ships.
    DHS and its component agencies have faced a number of challenges 
related to procuring services and major system acquisitions. When DHS 
was formed in 2003, it was responsible for integrating 22 agencies with 
disparate missions. Of these, only seven came with their own 
procurement offices, only some of which had also managed complex 
acquisitions such as the Coast Guard's Deepwater program or TSA's 
airport screening programs.
    While the Homeland Security Acquisition Manual and the Federal 
Acquisition Regulation (FAR) do not distinguish between the terms 
acquisition and procurement, DHS officials have noted that 
procurement--the actual transaction to acquire goods and services--is 
only one element of acquisition. The term acquisition can include the 
development of operational and life-cycle requirements, such as 
formulating concepts of operations, developing sound business 
strategies, exercising prudent financial management, assessing trade-
offs, and managing program risks.

          DHS HAS MADE SOME PROGRESS IN ACQUISITION MANAGEMENT

    We have identified three key performance areas for acquisition 
management: assessing and organizing acquisition functions to meet 
agency needs; developing clear and transparent policies and processes 
for all acquisitions; developing an acquisition work force to implement 
and monitor acquisitions. Our prior work has shown that these are among 
the key elements of an efficient, effective, and accountable 
acquisition function.\2\ We testified in April 2008 that, despite its 
initial positive acquisition management efforts, several challenges 
remained.\3\ The following summarizes each of these three areas:
---------------------------------------------------------------------------
    \2\ GAO, Framework for Assessing the Acquisition Function at 
Federal Agencies, GAO-05-218G (Washington, DC: September 2005).
    \3\ GAO, Department of Homeland Security: Progress Made in 
Implementation of Management Functions, but More Work Remains, GAO-08-
646T (Washington, DC: April 9, 2008).
---------------------------------------------------------------------------
   Assessing and organizing the acquisition function.--Since it 
        was created in 2003, DHS has recognized the need to improve 
        acquisition outcomes, and has taken some steps to organize and 
        assess the acquisition function. DHS has worked to integrate 
        the disparate acquisition processes and systems that the 
        component organizations brought with them when the Department 
        was created. To help assess acquisition management, in 2005 the 
        Department developed an oversight program. This program 
        incorporates DHS policy, internal controls, and elements of an 
        effective acquisition function.\4\ This program has been 
        partially implemented and monitors component-level performance 
        through four recurring reviews: Self-assessments; operational 
        status; on-site; and acquisition planning. However, DHS has not 
        yet accomplished its goal of integrating the acquisition 
        function across the Department. For example, the structure of 
        DHS's acquisition function creates ambiguity about who is 
        accountable for acquisition decisions because it depends on a 
        system of dual accountability and cooperation and collaboration 
        between the CPO and the component heads. DHS officials stated 
        in June 2007 that that they were in the process of modifying 
        the lines of business management directive to clarify the CPO's 
        authority; however, this directive has yet to be approved.
---------------------------------------------------------------------------
    \4\ GAO, Department of Homeland Security: Progress and Challenges 
in Implementing the Department's Acquisition Oversight Plan, GAO-07-900 
(Washington, DC: June 2007).
---------------------------------------------------------------------------
   Developing clear and transparent polices and processes.--DHS 
        had made some progress in this area but has generally not 
        developed clear and transparent policies and processes for all 
        acquisitions. Specifically, DHS put into place an investment 
        review process in 2003 that adopts many acquisition best 
        practices to help the Department reduce risk and increase the 
        chances for successful investment in terms of cost, schedule, 
        and performance. However, in 2005, we found that the process 
        did not include critical management reviews.\5\ Further, our 
        work has identified concerns with the implementation of the 
        investment review process. In 2007, we reported that DHS had 
        not fully implemented key practices of its investment review 
        process to control projects. For example, we reported that DHS 
        executives may not have the information they need to determine 
        whether information technology investments are meeting 
        expectations, which may increase the risk that underperforming 
        projects are not identified and corrected in a timely 
        manner.\6\ We have on-going work on the implementation of DHS's 
        investment review process scheduled to be released later this 
        year.
---------------------------------------------------------------------------
    \5\ GAO, Department of Homeland Security: Successes and Challenges 
in DHS's Effort to Create an Effective Acquisition Organization, GAO-
05-179 (Washington, DC: Mar. 29, 2005).
    \6\ GAO, Information Technology: DHS Needs to Fully Define and 
Implement Policies and Procedures for Effectively Managing Investments, 
GAO-07-424 (Washington, DC: April 27, 2007).
---------------------------------------------------------------------------
   Developing an acquisition work force to implement and 
        monitor acquisitions.--DHS has taken initial steps needed to 
        develop an acquisition work force. In 2006, DHS reported 
        significant progress in providing staff for the component 
        contracting offices, though much work remained to fill the 
        positions with qualified, trained acquisition professionals. 
        DHS has also taken a positive step by authorizing additional 
        staff for the CPO to provide staff for procurement oversight, 
        program management and cost analysis functions. We have on-
        going work on DHS's acquisition work force scheduled to be 
        released later this year.

    PLANNING FOR PROCUREMENT AND MAJOR ACQUISITIONS NEED IMPROVEMENT

    Our work on both services contracting and major investments has 
consistently identified the need for improved acquisition planning to 
better ensure taxpayer dollars are spent prudently. Acquisitions must 
be appropriately planned and structured to minimize the risk of the 
Government receiving services that are over cost estimates, delivered 
late, and of unacceptable quality.\7\ Specifically, we have emphasized 
the importance of clearly defined requirements to achieving desired 
results, and measurable performance standards to ensuring control and 
accountability. Too often, our work on Federal acquisitions has 
reported that unrealistic, inadequate, or frequently changing 
requirements have left the Government vulnerable to wasted taxpayer 
dollars.\8\ For services closely supporting inherently governmental 
functions, we found that DHS did not use risk assessment in its plans 
to hire contractors to provide these services.\9\ For services procured 
through methods such as interagency and performance-based contracting, 
we found acquisition planning was lacking.\10\ For major systems, 
acquisition planning includes establishing well-defined requirements 
and ensuring appropriate resources, such as adequate staffing and 
expertise, are in place to manage the investments; yet we have 
consistently found that these key elements are not in place.
---------------------------------------------------------------------------
    \7\ GAO-07-20.
    \8\ GAO, Federal Acquisitions and Contracting: Systemic Challenges 
Need Attention, GAO-07-1098T (Washington, DC: July 17, 2007).
    \9\ GAO, Department of Homeland Security: Improved Assessment and 
Oversight Needed to Manage Risk of Contracting for Selected Services, 
GAO-07-990 (Washington, DC: September 2007).
    \10\ GAO, Interagency Contracting: Improved Guidance, Planning, and 
Oversight Would Enable the Department of Homeland Security to Address 
Risks, GAO-06-996 (Washington, DC: September 2006), and GAO, Department 
of Homeland Security: Better Planning and Assessment Needed to Improve 
Outcomes for Complex Service Acquisitions, GAO-08-263 (Washington, DC: 
April 2008).
---------------------------------------------------------------------------
Inadequate Procurement Planning
    While there are benefits to using contractors to perform services 
for the Government--such as increased flexibility in fulfilling 
immediate needs--we and others have raised concerns about the Federal 
Government's increased reliance on contractor services. Of key concern 
is the risk associated with a contractor providing services that 
closely support inherently governmental functions: the loss of 
Government control over and accountability for mission-related policy 
and program decisions. Professional and management support services, 
including program management and support services such as acquisition 
support, budget preparation, intelligence services, and policy 
development, closely support inherently governmental functions. To help 
ensure that the Government does not lose control over and 
accountability for such decisions, longstanding Federal procurement 
policy requires attention to the risk that Government decisions may be 
influenced by, rather than independent from, contractor judgments when 
contracting for services that closely support inherently governmental 
functions. This type of risk assessment is also part of the acquisition 
planning process. While DHS program officials generally acknowledged 
that their professional and management support services contracts 
closely supported inherently governmental functions, they did notassess 
the risk of contractors providing these services. The nine cases we 
reviewed in detail provided examples of cases in which contractors 
provided services integral to and comparable to those provided by 
Government employees; contractors provided on-going support; and 
contract requirements were broadly defined. These conditions need to be 
carefully monitored to help ensure the Government does not lose control 
over and accountability for mission-related decisions. To improve DHS's 
ability to manage the risk of selected services that closely support 
inherently governmental functions, as well as Government control over 
and accountability for decisions, we recommended that DHS establish 
strategic-level guidance on and routinely assess the risk of using 
contractors for selected services and more clearly define contract 
requirements.
    DHS's use of interagency contracting--a process by which one agency 
uses another agency's contracts and contracting services--is another 
area we have identified acquisition planning was lacking. While 
interagency contracting offers the benefits of efficiency and 
convenience, in January 2005, we noted shortcomings and designated the 
management of interagency contracting as a Government-wide high-risk 
area. Our work on DHS's use of interagency contracting showed that the 
Department did not always select interagency contracts based on 
planning and analysis and instead made decisions based on the benefits 
of speed and convenience. We found that DHS conducted limited 
evaluation of contracting alternatives to ensure good value when 
selecting among interagency contracts. While interagency contracting is 
often chosen because it requires less planning than establishing a new 
contract, evaluating the selection of an interagency contract is 
important because not all interagency contracts provide good value when 
considering both timeliness and total cost. Although DHS guidance has 
required planning and analysis of alternatives for all acquisitions 
since July 2005, we found that it was not conducted for the four cases 
in our review for which it was required. To improve the management of 
interagency contracting, we recommended that DHS develop consistent, 
comprehensive guidance and training and establish criteria to consider 
in selecting an interagency contract.
Major Investments Using a Performance-Based Approach
    To help improve service acquisition outcomes, Federal procurement 
policy calls for agencies to use a performance-based approach to the 
maximum extent practicable. This approach includes: a performance work 
statement that describes outcome-oriented requirements, measurable 
performance standards, and quality assurance surveillance. In using a 
performance-based approach, the FAR requires contract outcomes or 
requirements to be well-defined, that is, providing clear descriptions 
of results to be achieved. Our prior reviews of complex DHS investments 
using a performance-based approach point to a number of shortcomings. 
For example, in June 2007, we reported that a performance-based 
contract for a DHS financial management system, eMerge2, lacked clear 
and complete requirements, which led to schedule delays and 
unacceptable contractor performance.\11\ Ultimately, the program was 
terminated after a $52 million investment. The DHS Inspector General 
has also indicated numerous opportunities for DHS to make better use of 
sound practices, such as well-defined requirements.\12\
---------------------------------------------------------------------------
    \11\ GAO, Homeland Security: Departmentwide Integrated Financial 
Management Systems Remain a Challenge, GAO-07-536 (Washington, DC: June 
21, 2007).
    \12\ See for example, Department of Homeland Security Inspector 
General, Major Management Challenges Facing the Department of Homeland 
Security, OIG-08-11 (January 2008), and Department of Homeland Security 
Inspector General, Transportation Security Administration's Information 
Technology Managed Services Contract, OIG-06-23 (February 2006).
---------------------------------------------------------------------------
    Consistent with these findings, our 2008 report on performance-
based acquisitions, for which we reviewed contracts for eight major 
investments at Coast Guard, CBP, and TSA, found that contracts for 
investments that did not have well-defined requirements, or a complete 
set of measurable performance standards, or both, at the time of 
contract award or the start of work-experienced cost overruns, schedule 
delays, or did not otherwise meet performance expectations.\13\ In 
contrast, service contracts for investments that had well-defined 
requirements linked to measurable standards performed within budget 
meeting the standards in all cases where contractors had begun work. 
For example, TSA's Screening Partnership Program improved its 
contracted services at the San Francisco International Airport to 
incorporate well-defined requirements linked to clearly measurable 
performance standards and delivered services within budget. To improve 
the outcomes of performance-based acquisitions, we recommended that DHS 
improve acquisition planning for requirements for major complex 
investments to ensure they are well-defined, and develop consistently 
measurable performance standards linked to those requirements. 
Following are examples of complex investments with contracts that did 
not have well-defined requirements or complete measurable performance 
standards and did not meet cost, schedule, or performance expectations.
---------------------------------------------------------------------------
    \13\ GAO-08-263.
---------------------------------------------------------------------------
    Contracts for systems development for two CBP major investments--
Automated Commercial Environment (ACE) and Secure Border Initiative 
(SBInet)--lacked both well-defined requirements and measurable 
performance standards prior to the start of work and both experienced 
poor outcomes. The first, for DHS's ACE Task Order 23 project--a trade 
software modernization effort--was originally estimated to cost $52.7 
million over a period of approximately 17 months.\14\ However, the 
program lacked stable requirements at contract award and, therefore, 
could not establish measurable performance standards and valid cost or 
schedule baselines for assessing contractor performance. Software 
requirements were added after contract award, contributing to a project 
cost increase of approximately $21.1 million, or 40 percent, over the 
original estimate. Because some portions of the work were delayed to 
better define requirements, the project is not expected to be completed 
until January 2011--over 3 years later than originally planned.
---------------------------------------------------------------------------
    \14\ Begun in 2001, ACE is intended to replace and supplement 
existing cargo processing technology and will be developed and deployed 
in a series of increments. The goals of ACE include: (1) Supporting 
border security by enhancing analysis and information sharing with 
other Government agencies and providing CBP with the means to decide 
before a shipment reaches the border if it should be targeted or 
expedited; and, (2) streamlining time-consuming and labor-intensive 
tasks for CBP personnel and the trade community through a national 
trade account and single Web-based interface. Task Order 23 was the 
sole focus of our review.
---------------------------------------------------------------------------
    The second, Project 28 for systems development for CBP's SBInet--a 
project to help secure a section of the United States-Mexico border 
using a surveillance system--did not meet expected outcomes due to a 
lack of both well-defined requirements and measurable performance 
standards. CBP awarded the Project 28 contract planned as SBInet's 
proof of concept and the first increment of the fielded SBInet system 
before the overall SBInet operational requirements and system 
specifications were finalized. More than 3 months after Project 28 was 
awarded, DHS's Inspector General reported that CBP had not properly 
defined SBInet's operational requirements and needed to do so quickly 
to avoid rework of the contractor's systems engineering. We found that 
several performance standards were not clearly defined to isolate the 
contractor's performance from that of CBP employees, making it 
difficult to determine whether any problems were due to the 
contractor's system design, CBP employees, or both. As a result, it was 
not clear how CBP intended to measure compliance with the Project 28 
standard for probability of detecting persons attempting to illegally 
cross the border. Although it did not fully meet user needs and its 
design will not be used as a basis for future SBInet development, DHS 
fully accepted the project after an 8-month delay.\15\ In addition, DHS 
officials have stated that much of the Project 28 system will be 
replaced by new equipment and software. However, Project 28 is just one 
part of the entire Secure Border Initiative, and our recent work has 
noted that requirements and testing processes for the initiative have 
not been effectively managed, and important aspects of the program 
remain in flux.\16\
---------------------------------------------------------------------------
    \15\ GAO, Secure Border Initiative: Observations on the Importance 
of Applying Lessons Learned to Future Projects, GAO-08-508T 
(Washington, DC: Feb. 27, 2008).
    \16\ GAO, Secure Border Initiative: DHS Needs to Address 
Significant Risks in Delivering Key Technology Investment, GAO-08-1148T 
(Washington, DC: Sept. 10, 2008).
---------------------------------------------------------------------------
    Additionally, our work has found that the Coast Guard's Deepwater 
Program, on-going since the late 1990's, is intended to replace or 
modernize 15 major classes of Coast Guard assets. In March 2007, we 
reported that the Coast Guard's Deepwater contract had requirements 
that were set at unrealistic levels and were frequently changed.\17\ 
For some of the Deepwater assets, this resulted in cost escalation, 
schedule delays, and reduced contractor accountability over a period of 
many years of producing poor results such as ships that experienced 
serious structural defects. In light of these serious performance and 
management problems, Coast Guard leadership has changed its approach to 
this acquisition.\18\ It has taken over the lead role in systems 
integration, which was formerly held by a contractor. Formerly, the 
contractor had significant program management responsibilities, such as 
contractual responsibility for drafting task orders and managing the 
system integration of Deepwater as a whole. Coast Guard project 
managers and technical experts now hold the greater balance of 
management responsibility and accountability for program outcomes. 
Coast Guard officials have begun to hold competitions for Deepwater 
assets outside of the lead system integrator contract, and cost and 
schedule information is now captured at a level that has resulted in 
improved visibility, such as the ability to track and report cost 
breaches for assets. The Coast Guard has also begun to follow a 
disciplined project management framework, requiring documentation and 
approval of decisions at key points in a program's life cycle. However, 
like other Federal agencies, the Coast Guard has faced challenges in 
building an adequate Government work force and is relying on support 
contractors in key positions, such as cost estimators and contract 
specialists.
---------------------------------------------------------------------------
    \17\ GAO, Coast Guard: Status of Efforts to Improve Deepwater 
Program Management and Address Operational Challenges, GAO-07-575T 
(Washington DC: Mar. 8, 2007).
    \18\ GAO, Coast Guard: Change in Course Improves Deepwater 
Management and Oversight, but Outcome Still Uncertain, GAO-08-745 
(Washington, DC: June 24, 2008).
---------------------------------------------------------------------------
        OVERSIGHT CONSISTENTLY IDENTIFIED AS NEEDING IMPROVEMENT

    Our work on contractors performing services closely supporting 
inherently governmental functions found that DHS program officials and 
contracting officers were not aware of Federal requirements for 
enhanced oversight for these types of services. Both the FAR and the 
Office of Management and Budget's Office of Federal Procurement Policy 
(OFPP) policy state that when contracting for these types of services a 
sufficient number of qualified Government employees assigned to plan 
and oversee these contractor activities is needed to maintain control 
and accountability. For the nine cases we reviewed, the level of 
oversight provided did not always help ensure accountability for 
decisions or the ability to judge whether contractors were performing 
as required.\19\ We found cases in which the DHS components lacked the 
capacity to oversee contractor performance due to limited expertise and 
workload demands. DHS components were also limited in their ability to 
assess contractor performance in a way that addressed the risk of 
contracting for services that closely support inherently governmental 
functions. Assessing contractor performance requires a plan that 
outlines how services will be delivered and establishes measurable 
outcomes. However, none of the oversight plans and contract documents 
we reviewed contained specific measures for assessing contractor 
performance of selected services. To address this deficiency, we 
recommended that DHS assess the ability of its work force to provide 
sufficient oversight when using these types of contracted services.
---------------------------------------------------------------------------
    \19\ FAR section 37.114, Special Acquisition Requirements; OFPP 
Policy Letter 93-1: Management Oversight of Service Contracting, Office 
of Federal Procurement Policy, May 18, 1994.
---------------------------------------------------------------------------
    Limited oversight also is due in part to insufficient data to 
monitor acquisitions. Our work on procurement methods, such as 
interagency contracting and performance-based acquisition, has found 
that DHS does not systematically monitor its use of these contracts to 
assess whether these methods are being properly managed, or to assess 
costs, benefits, or other outcomes of these acquisition methods. With 
regard to interagency contracting, we found that DHS was not able to 
readily provide data on the amounts spent through different types of 
contracts or on the fees paid to other agencies for the use of their 
contracting services or vehicles. This lack of information means that 
DHS cannot assess whether the Department could achieve savings through 
using another type of contracting vehicle. We similarly found that DHS 
did not have reliable data on performance-based acquisitions to 
facilitate required reporting, informed decisions, and analysis of 
acquisition outcomes. For example, our review of contracts at the Coast 
Guard, CBP, Immigration and Customs Enforcement (ICE), and TSA showed 
that, about 51 percent of the 138 contracts we identified in FPDS-NG as 
performance-based had none of the required performance-based elements: 
A performance work statement; measurable performance standards; and a 
method of assessing contractor performance against performance 
standards. The unreliability of these data makes it difficult for DHS 
to be able to accurately report on Government-wide performance targets 
for performance-based acquisitions. We have recommended that DHS work 
to improve the quality of FPDS-NG data so that DHS can more accurately 
identify and assess the quality of the use and outcomes of various 
procurement methods.
    Inaccurate Federal procurement data is not unique to DHS and is a 
long-standing Government-wide concern. Our prior work and the work of 
the General Services Administration's Inspector General have identified 
issues with the accuracy and completeness of FPDS and FPDS-NG data,\20\ 
and OMB has stressed the importance of submitting timely and accurate 
procurement data to FPDS-NG. The Acquisition Advisory Panel \21\ has 
also raised concerns about the accuracy of FPDS-NG data.\22\ These 
circumstances illustrate the magnitude of the challenge DHS faces in 
developing timely and accurate data to monitor acquisitions.
---------------------------------------------------------------------------
    \20\ For example, GAO, Reliability of Federal Procurement Data, 
GAO-04-295R (Washington, DC: Dec. 30, 2003); GAO, Improvements Needed 
to the Federal Procurement Data System--Next Generation, GAO-05-960R 
(Washington, DC: Sept. 27, 2005); and General Services Administration 
Inspector General, Review of the Federal Procurement Data System--Next 
Generation (FPDS-NG), Report Number A040127/O/T/F06016 (March 2006).
    \21\ Authorized by section 1423 of the Services Acquisition Reform 
Act of 2003 as part of the National Defense Authorization Act of 2004. 
Pub. L. No. 108-136.
    \22\ Report of the Acquisition Advisory Panel to the Office of 
Federal Procurement Policy and the U.S. Congress. January 2007.
---------------------------------------------------------------------------
    To improve procurement oversight, the CPO established and has 
implemented a Department-wide program to provide comprehensive insight 
into each component's programs and disseminate successful management 
techniques throughout DHS.\23\ This program, which is based on a series 
of component-level reviews, was designed with the flexibility to 
address specific procurement issues. As such, it could be used to 
address areas such as performance-based acquisitions, interagency 
contracting, and the appropriate use of contractors providing services 
closely supporting inherently governmental functions. Some of the four 
key oversight reviews have begun under this program, but management 
assessments, or evaluation of the outcomes of acquisition methods and 
contracted services, have not been conducted. Our work has found that 
the CPO continues to face challenges in maintaining the staffing levels 
needed to fully implement the oversight program, and CPO authority to 
ensure that components comply with the procurement oversight plan 
remains unclear.
---------------------------------------------------------------------------
    \23\ GAO-07-900.
---------------------------------------------------------------------------
                               CONCLUSION

    Improving acquisition outcomes has been an on-going challenge since 
DHS was established in 2003. Our work has consistently noted that sound 
acquisition planning, including clearly defining requirements, and 
ensuring adequate oversight are hallmarks of successful service 
acquisitions. A sufficient acquisition work force is also key to 
properly managing acquisitions. Our body of work has also included many 
recommendations to the Secretary of Homeland Security to take actions 
aimed at improving acquisition management, planning, and oversight. 
While DHS has generally concurred with our recommendations, the 
Department has not always stated how the underlying causes of the 
deficiencies we have identified will be addressed. Until the Department 
takes needed action to address these causes, it will continue to be 
challenged to make the best use of its acquisition dollars.
    Mr. Chairman, this concludes my prepared statement. I would be 
happy to respond to any questions that you or other Members of the 
subcommittee may have at this time.

    Mr. Carney. Thank you, Mr. Hutton.
    I would like to thank all the Members for their testimony.
    I would like to remind everybody here, the three of us, 
that we will have 5 minutes to question the panel. I will start 
with myself first.
    Mr. Gunderson, it has been noted the size of the 
Department's acquisition work force has not been large enough. 
I think you mentioned you have increased the number from 600 to 
1,000 from 2003 to present, but still not large enough to 
manage the high level of procurements that you have today.
    Do you think it is large enough?
    Mr. Gunderson. No, I do not.
    First, I also want to distinguish between the contracting 
staff needed as well as the other acquisition disciplines, 
because, obviously, acquisition is made up of all the different 
disciplines I mentioned in my testimony.
    Contracting career field, 1102 series, has been a 
significant challenge in ramping it up, given the demand that 
we have, especially in the D.C. area. We have looked at 
standing up offices across the country as well, where it makes 
sense for some of the components. But when you are competing in 
the D.C. area for a lot of these positions with the DOD 
presence, we continue to struggle there.
    But we do have an intern program that we have instituted. 
In fiscal year 2008, we have brought on three cohorts, groups 
of interns. So, by the end of this month, we are going to have 
roughly 49 contract specialist interns that will be on board in 
our training program.
    Mr. Carney. Of the thousand or so you have on board now, 
what is the rough ratio of Government employees to contractors 
in the procurement?
    Mr. Gunderson. Performing contracting specialist roles?
    Mr. Carney. Correct, yes.
    Mr. Gunderson. I don't have the exact numbers, but I think 
the number is certainly under 5 percent. I think it is a small 
number of contractors that are providing that type of service.
    When I was at TSA and we had roughly 100 people in the 
office, we had less than five people that were performing that 
type of role. We were phasing them out as we were able to grow 
the organic capability.
    Mr. Carney. Okay.
    Shifting gears slightly here, what do you think would be, 
sort of, the maximum amount in dollar terms that a single 
program manager should be responsible for overseeing?
    Mr. Gunderson. I wouldn't look at it from a dollar 
perspective, because if you look at certain programs, you could 
have one--if you are in the Navy and you are buying an aircraft 
carrier, that is going to be one significant dollar figure. At 
the same time, you could have someone who is managing multiple 
programs. I would look at the different programs that you would 
have to manage from a workload perspective. You don't want to 
have people having multiple responsibilities managing multiple 
programs. You want to be able to focus on the given objectives 
of the mission that is put before you.
    Mr. Carney. Okay, fair enough.
    Now, several instances, like Secure Flight, SBInet, HSIN, 
for example, the Department entered into a contract with the 
same contractor after the initial contract for the same or 
similar program failed.
    How does the Department justify using the same contractors 
over and over again, in some instances in the sole source 
capacity? You have actually produced sort-of subpar results. 
Why do we continue to do that?
    Mr. Gunderson. I am not familiar with each of the programs 
that you mentioned. You said SBI was one of the programs?
    Mr. Carney. Yes.
    Mr. Gunderson. Obviously a contract was awarded to Boeing 
there, and that contract has different pieces to it, both the 
technology side as well as defense. They performed different 
task orders. It is a multiple award contract, so it is not that 
we are awarding new contracts, we are awarding new tasks under 
a basic contract that was awarded to them which allows for 
incremental evolution of the program, so that they are going to 
be--for example, in P28, Project 28, it was basically a proof 
of concept task order, where the contractor was asked to assess 
different technologies to see how they were suitable for 
meeting the operator's needs. Then they will continue to go off 
from there to take lessons learned from that.
    Mr. Carney. I think one of the lessons learned, certainly 
that Boeing testified to, is that they didn't put their A team 
on that one. We weren't quite sure how far down the alphabet 
they did go, but they needed to do better.
    So, you know, I think it is fair, I think the taxpayers 
deserve to know if we are hiring various contractors and it is 
subpar. You know, par is pretty good, but if it is--well, if we 
are going to use golf terms, if it is over par, which is bad, 
then we shouldn't be rewarding them for that efforts.
    Okay, the Chair now recognizes the gentleman from Alabama.
    Mr. Rogers. Thank you, Mr. Chairman.
    Mr. Taylor, one of the things I heard you offer as a 
recurring theme was that you saw in these poorly performed 
contracts a sense of urgency, was the phrase you used 
repeatedly.
    Tell me more about how you saw that, historically, as being 
problematic.
    Mr. Taylor. Starting with Deepwater, it was a pre-existing 
contract to DHS, but it was a situation where there was a 
perceived urgent need to replace aging fleet, as well as a lot 
of pressure from Congress because the Coast Guard wasn't moving 
as quickly as deemed necessary. So they essentially turned over 
the whole enterprise, the oversight itself, to contractors, a 
consortium. There was no competition. So they thought that was 
a streamlined approach. The consortium could tell them to 
address their requirements and could tell them how to address 
those requirements and build the correct ships to go forward.
    In FEMA's case, the disasters that occur, they go out and 
they have a situation like Katrina. The one area where FEMA was 
the weakest was on catastrophic disasters, and particularly in 
catastrophic housing. When that occurred, they tried to do it 
on the fly. When you get that, you get some of the things we 
talked about last week in our report and you also get a lot of 
the other things you read about in the paper. There are--even 
though there are times you have to respond quickly and you have 
to do things.
    Mr. Rogers. You made reference to things you read about in 
the paper, and I want to go back to what was in today's 
Washington Post.
    Mr. Taylor. I am sorry, sir, I was referring to our report 
we released last week.
    Mr. Rogers. Go ahead. I am sorry.
    Mr. Taylor. This is the ITAC report. We released it last 
week.
    In those situations, even though they are catastrophic 
occurrences, we shouldn't have to put ourselves in a place 
where we have to do it on the fly. That is exactly what 
happened in that case and in a bunch of other cases we reported 
on over the years.
    Mr. Rogers. Well, I do want to go to today's Washington 
Post article, because it talks about how $200 million was 
mismanaged and poorly spent. However, in your opening 
statement, you made reference to the trailers and you mentioned 
$46 million.
    Which is the accurate figure?
    Mr. Taylor. In our report, we specifically identified $46 
million that FEMA incurred in costs they shouldn't have because 
of their inability to identify and review vouchers and invoices 
that were coming in from the vendors.
    The actual number--that is a conservative number--the 
actual amount of money that we spent we probably shouldn't have 
is probably higher because of the nature of the contracts. But 
the $200 million I can't speak to.
    Mr. Rogers. Okay. So you don't know if that is accurate or 
not then?
    Mr. Taylor. No, sir.
    Mr. Rogers. I also noticed, in the same Washington Post 
article, it made reference to the $1.5 billion Boeing program 
for the Secure Border Initiative, SBI. It talks about how there 
was a shelving of that initiative, when, in fact, my 
understanding is that what was done was that they took the 
technological aspects of the Secure Border Initiative and put 
them aside while they made a priority of putting the fence up.
    Have they shelved that technology, to your knowledge?
    Mr. Taylor. I couldn't answer the question, sir. But, to my 
knowledge, they haven't shelved the technology. But we have not 
looked at that area.
    Mr. Rogers. Mr. Gunderson, I will talk to you a little bit 
about your response to the Chairman's question on numbers of 
procurement officers. Is it your sense that the problems that 
we are seeing in DHS procurement is solely a result of 
insufficient resources for the personnel?
    Mr. Gunderson. It is not just resources. I mean, if you 
look at the three priorities that are put forth from the CPO, 
work force is one of those. Again, that is contracting and 
other acquisition disciplines. In addition to that, it is a 
process issue. The Department is moving forward in that area. I 
mentioned in my testimony that----
    Mr. Rogers. Give me a couple of examples about what you 
mean by moving forward.
    Mr. Gunderson. Okay. To date, we have had what is called 
Management Directive 1400, which basically provided the 
framework for investment reviews. This system has been not 
linked with the other important aspects of an acquisition 
program, such as requirements and budgeting. So the new program 
that is being put in place should be released within the next 
couple of months. It is going to integrate all those pieces 
together and ensure that we are going to have requirements that 
are validated, planned and budgeted for, and be prepared to 
execute.
    Mr. Rogers. Do you have any idea why that wasn't taking 
place already?
    Mr. Gunderson. The previous management directive that was 
put in place, again, it was a first step. I look at it from an 
evolutionary standpoint. When the Department stood up, again, 
back in the 2003 time frame, there was only a handful of people 
within CPO. So, as we have now been able to bring in the right 
people who have the expertise--this group is being led by a 
former dean of Defense Acquisition University, as well as a 
very competent staff, and being able to do it right.
    Mr. Rogers. So, in sum, what I gather from what you just 
said is that, while it has been unfortunate, this has not been 
an unreasonable developmental stage over the last several years 
in this growing departmental responsibility.
    Mr. Gunderson. I would concur with that.
    Mr. Rogers. Thank you.
    I yield back, Mr. Chairman.
    Mr. Carney. Thank you.
    The Chair now recognizes the Chairman of the full 
committee, the gentleman from Mississippi, Mr. Thompson.
    Mr. Thompson. Thank you.
    I would assume from your answer to Mr. Rogers's last 
question that you would expect waste and mismanagement to be a 
part of your operation?
    Mr. Gunderson. No, I don't believe waste is a part of the 
operation.
    Mr. Thompson. Well, please feel free to elaborate on your 
last answer, because that was the interpretation I received 
from your answer.
    Mr. Gunderson. What I was explaining is that the process 
for governing our acquisitions has taken an evolution from the 
beginning of our stand-up to where we are today. We are 
strengthening that process, making sure that we have the people 
to be able to make the right decisions in place and that the 
programs come up at the right points in time before they 
proceed any further.
    Frankly, portraying some of these programs and contracts as 
wasteful, I don't necessarily agree with that. A lot of times 
these contracts have dealt with what I call preproduction 
environments, so we are dealing with a lot of design and 
development and testing, and we are qualifying things before we 
move out into production. I think it is the same thing that you 
would find at DOD.
    Mr. Thompson. Well, we differ. Let me give you a couple of 
examples on how we differ on waste and abuse.
    Do you have any knowledge of the Deepwater contract?
    Mr. Gunderson. I have a little bit of familiarity with it.
    Mr. Thompson. Are you aware that we lost several hundred 
millions of dollars on that contract and the boats didn't 
float?
    Mr. Gunderson. Yes, I understand.
    Mr. Thompson. So that, in our mind, is a problem. It was a 
procurement problem. So, I think our responsibility, as a 
committee, is to try to limit that. Part of the oversight 
responsibility is, if it is a matter of you needing more people 
to be trained, we would be happy to provide it, but we need in 
our oversight responsibility to get the facts.
    The two gentlemen to your left have, for all intents and 
purposes, said that there are some things they would recommend 
that you do in order to get there. I did not hear whether or 
not you formally responded to the report or not. Have you?
    Mr. Gunderson. Which particular report?
    Mr. Thompson. The IG report from last week.
    Mr. Taylor. Yes, they did, sir. The Department did respond 
to our ITAC report that was released last week, and they 
concurred with the majority of our recommendations.
    Mr. Thompson. Okay. Well, and that is the point I am trying 
to get to, is now that we have a framework to work from, our 
goal is to try to get there as fast as we can.
    One of the criticisms we hear is the overreliance on 
contractors. Your testimony today sort of gave us the fact that 
that is no longer a real problem within the Department because 
you have ramped up enough through your various programs that 
that is no longer a concern of yours.
    Am I interpreting your testimony correct?
    Mr. Gunderson. We always take a look at our acquisitions as 
we move forward to assess the role of contractors in them. So 
are we saying that we are 100 percent where we want to be with 
respect to that? No. But there are several examples of where we 
have gone from an original business strategy which did rely on 
contractors heavily and move forward to where we are using an 
organic capability to manage those programs.
    So, while we are not totally to where we want to be, we 
have made significant progress. We will continue to assess each 
situation.
    Mr. Thompson. So are you aware of any contracting conflicts 
of interest that might presently exist within procurement?
    Mr. Gunderson. No.
    Mr. Thompson. Can you provide this committee with any of 
those conflicts that have previously occurred that have been 
resolved? Or you don't know any?
    Mr. Gunderson. I am not aware of any, but if you are asking 
for us to go back and examine that, we can.
    Mr. Thompson. Well, let me give you one. Some of the 
contractors that were tasked with overseeing the SBInet 
contract were business partners of Boeing. Some of us think 
that is a potential conflict.
    I would like to know, if that conflict is there, what, if 
any, measures are in place to prevent this type of conflict 
going forward?
    Mr. Gunderson. Okay. I am not aware of the contractor you 
are referencing that was overseeing the Boeing contract.
    Mr. Thompson. I will be happy to give it to you.
    Mr. Gunderson. Okay.
    Mr. Thompson. I am all right.
    Mr. Carney. Thank you, Mr. Chairman.
    Mr. Taylor, we see that there are several no-bid contracts 
out there that the Department awards, meaning that only one 
company gets an opportunity to bid on a contract. Can you, kind 
of, describe the potentials for abuse that exists in a 
situation like that?
    Mr. Taylor. Sure. In situations where you have no-bid 
contracts, you are running the danger of not getting best 
value, not to mention best price. In some cases, depending on 
the nature of the contract, like we reported on last week in 
the ITAC report, depending on how you write the contract and 
oversee it, there is a potential for the contracts to have 
uncontrolled growth and for you not to get the results that you 
are seeking.
    Mr. Carney. This is for any one of you. Do you know roughly 
how many no-bid contracts have been awarded in your tenure, Mr. 
Gunderson, for example?
    Mr. Gunderson. Specific numbers, no. I mean, typically--we 
have that data back in the office, yes.
    Mr. Carney. We would love to see it, please.
    Mr. Gunderson. We usually are tracking percentages of 
competition versus noncompetitive actions.
    Mr. Carney. Okay.
    Mr. Hutton.
    Mr. Hutton. I do not have data on that particular question, 
sir.
    Mr. Carney. Do you have any insight into that? What have 
you encountered?
    Mr. Hutton. Well, I think the IG representative clearly 
pointed out some of the issues associated with that type of 
contract.
    Mr. Carney. But do you have any sense of the numbers?
    Mr. Hutton. No, sir, I do not.
    Mr. Carney. Okay, okay. Thanks.
    So do we know if we have seen a higher level of 
mismanagement of no-bids versus competitive contracts? Mr. 
Taylor.
    Mr. Taylor. We actually have an on-going audit report now, 
a review going on as we speak, of noncompetitive contracts, and 
we are hoping to have that out by the first of the year.
    Mr. Carney. Post haste, please.
    Mr. Taylor. Yes, sir.
    Mr. Carney. Appreciate it.
    Mr. Gunderson, so what are some of the--let's think a 
little bit creatively here on what DHS is trying to do to 
increase the number of procurement officers and contracts. Is 
there anything else going on? You have this internship program, 
but do you have something else?
    Mr. Gunderson. The internship I think is the primary 
mechanism to rebuilding our contracting community. But at the 
same time, as I mentioned, we continue to look at all grade 
levels.
    Also, I think was mentioned at the beginning also about 
looking at folks that have maybe retired and bringing them back 
as rehired annuitants. Again, we think that this is a valuable 
tool, to bring those people in and to mentor the significant 
number of junior folks that we are bringing on board.
    Mr. Carney. Now, the interns come from where? Within 
Government? From colleges? How does this work?
    Mr. Gunderson. Primarily colleges. We do a significant 
amount of recruiting across the country. There are some people 
who have come in with previous business experience. While we 
are doing the recruiting at the colleges, we also have plenty 
of other advertisements in seeking people who are interested in 
that sort of training program.
    It is a very appealing program. As we bring on the interns 
and we ask them what attracted them to the program, they say 
they liked the disciplined approach and the training that they 
were going to receive.
    Mr. Carney. The training they were going to receive at DHS 
you mean?
    Mr. Gunderson. Through the 3-year program, yes.
    Mr. Carney. Can you describe--hopefully, I want a good 
number here--kind of, the growth in the number of interns? How 
long has this internship program been in place, and what have 
you noticed in trends so far?
    Mr. Gunderson. As a centralized program at DHS, fiscal year 
2008 was its first year. So, as I mentioned earlier, we were 
going to be about 49.
    But previous to that, if you look at the individual 
components, they were also doing similar efforts. So we are now 
bringing it together into one centralized program.
    While I was at TSA, we had 3 different years of junior 
specialists that were brought on, probably totally in the 50 
range as well.
    Mr. Carney. Okay.
    Mr. Hutton, what do you think would be the optimum number 
of procurement officers for DHS? We are at a thousand now, and, 
according to the testimony, about 50 are contractors. Is that 
sufficient? Do we need more? If more, how many more?
    Mr. Hutton. Mr. Chairman, I don't have a number for you, 
but I wanted to make two key points here. I think it is 
instructive to think about the work force, acquisition work 
force, in much broader terms than the contract specialist. You 
have a lot of other disciplines and expertise needed, 
particularly when we are concerned about the large investments. 
You have people like systems engineers, you have people that 
are involved in cost estimating, you have program managers, you 
have those that are the contracting technical reps on 
contracts.
    All of these folks are people that are involved in these 
large acquisitions. I think, by looking at it more broadly, it 
allows you to get a better handle on what the current condition 
is as to where we are with the acquisition work force. That is 
a particular issue that was touched upon, and maybe it is not 
fair to say even more than touched upon, by the Acquisition 
Advisory Panel. They had a whole section on reliance on 
contractors.
    Mr. Carney. Okay.
    Mr. Gunderson.
    Mr. Gunderson. If you don't mind, I would like to add on to 
that to give a brief description of what we are doing at the 
Department to address those other career fields.
    While we have started with the contracting 1102 series, we 
are also establishing the certification requirements and 
training requirements for our program managers and COTRs. 
Obviously COTRs, or contracting officer technical 
representatives, are critical to ensuring we get what we buy. 
Then also going into systems engineering and tests and 
evaluation; we recognize those as key functions. So working on 
the certifications and training required for those career 
fields.
    Mr. Carney. Okay, thank you.
    I have exceeded my time. Mr. Rogers.
    Mr. Rogers. Thank you, Mr. Chairman.
    I want to pick back up where I left off and address this to 
Mr. Taylor or Mr. Hutton.
    I try to keep in mind when we are critiquing the Department 
in a host of areas that this is the second-largest 
reorganization of Government since the creation of the Defense 
Department. It has been massive, and it has been taking place 
for 5 years. So I asked Mr. Gunderson a little while ago, given 
that they started with a handful of officers trying to handle 
this activity and now they are up to a thousand, is it a 
reasonable level of development to see those problems that we 
have seen happen?
    I would ask that to you all. Do you all see the development 
progressing in a way that is satisfactory to you, given where 
they have come from and where they are now as a Department?
    I would ask you, Mr. Taylor, first.
    Mr. Taylor. Sure. As I mentioned before, we issued our 
first management scorecard on the procurement function last 
year. At that time, and this is nearly 18 months ago, at that 
time we gave them a modest progress report, that there was 
modest progress going on in many of the different areas that we 
were identifying.
    The things that Mr. Gunderson has talked about are in the 
planning stage or implementation stage. But they have accepted 
over 90 percent of the recommendations we have made regarding 
procurement activities in the reports we have issued. So we 
think it is a very positive development.
    There is a long way to go. We are extremely concerned about 
contracting and about overuse of contractors, things like that. 
But we do think the Department has a plan. Assuming that 
management, senior management, stays focused on this area 
during this critical transition, this is an area that could 
substantially improve over the coming years.
    Mr. Rogers. Overall, though, do you feel that, given where 
they came from 5 years ago and where they are now, they are 
making a satisfactory level of progress as time walks along?
    Mr. Taylor. We are encouraged at the Department level. We 
have some concerns at certain components. So for the 
Department, yes. It would be component by component beyond 
that.
    Mr. Rogers. Thank you.
    Mr. Hutton, same question.
    Mr. Hutton. Certainly we all understand the challenges. 
They are taking steps. But just to put a few examples out 
there, we were discussing earlier the investment review process 
that was put into effect back in 2004, I believe. We looked at 
that at the time, and we thought that was a pretty good 
process. Yeah, we had some criticisms or suggestions to 
strengthen it, but we thought that was a pretty good process to 
help guide your major investments along the way.
    But as time went on, there haven't been changes based on 
our recommendations in the areas that we discussed to date. I 
think that the fact that the process has been in revision since 
about 2005 raises questions about, well, are these serious 
impediments that are keeping us from making this process a 
little healthier than not? I am not sure what the answer is to 
that, sir.
    But I do think that among many fronts you see activities 
under way, but I guess I am kind of hoping that we start seeing 
a little more closure on some of these activities.
    Mr. Rogers. I think we all do. Thank you.
    I try to keep in mind when I am talking to folks about the 
growth and maturation that we are seeing in the Department 
where we have come from. I think evidence of some of the 
development, good evidence, is what we just saw with the 
hurricanes that we just had on the coast and the way the 
Department responded, much more professionally. They had their 
act together. They clearly have been learning from past 
lessons. Then we had a tornado at Enterprise High School down 
in Alabama a few months ago. Again, nothing but rave reviews 
for the Department.
    So I think that they are getting better in a lot of 
different ways. However, as the Chairman, both Chairmen have 
pointed out, we have got a long way to go, and we want to make 
sure we do better.
    I now want to shift to what we can do better and see what 
your thoughts are on that. Congressional oversight--you know, 
we still have just broad jurisdiction across the Congress 
exercising oversight of this Department. I am of the opinion 
that is hindering the Department.
    Just in a nutshell, I would like to ask each one of you to 
tell me, am I right or am I wrong?
    Starting with Mr. Gunderson.
    Mr. Gunderson. The oversight is significant and it does 
have a direct impact on the folks that are doing the business 
both at headquarters and at the components. Speaking from my 
experience, you know, we talked earlier about the number of 
folks that we have on board that are trying to get the job done 
well. So when we have the numerous reviews, sometimes 
overlapping unfortunately, that takes people away from doing 
their core work functional responsibility. It is not to say 
that we should not be supporting that and learning from it, but 
it does impact operations.
    Mr. Rogers. I agree. I think everybody wants oversight. We 
just want it to be consolidated in this committee if it is 
going to be of the Department of Homeland Security. Mr. Taylor.
    Mr. Taylor. Yes, sir. When it comes to the oversight done 
at the level of GAO and the IG's office, we make it a point to 
coordinate our activities so that we try not to duplicate what 
we are doing and make it any worse in the department than we 
have to just to do our jobs. In terms of congressional 
oversight, yeah, I mean, there was the one 9/11 Commission 
recommendation that wasn't adopted. However, when it comes down 
to awarding a contract, barring a disaster, I don't think the 
number of congressional committees we respond to is going to 
have much of a direct impact on their job.
    Mr. Rogers. Mr. Hutton.
    Mr. Hutton. Mr. Rogers, I would just say that GAO, when we 
look at the activities over at the Department and we make our 
recommendation, what we are doing at that time is shedding 
light on some important issues and we bring them to the 
attention of Congress. I do think oversight hearings like this 
are very important because I think the oversight hearings and 
through our work and through the faithful efforts of DHS to 
implement these recommendations I think the hearings bring a 
little heat sometimes and when you bring a little heat you 
bring some change.
    Mr. Rogers. Thank you very much, Mr. Chairman.
    Mr. Carney. Thank you, Mr. Rogers. Mr. Thompson, 5 minutes.
    Mr. Thompson. Mr. Taylor, for the benefit of me, can you 
tell me whether or not there is any procurement standard that 
you are using to evaluate DHS that is not the accepted standard 
in fellow contracting?
    Mr. Taylor. No, sir, we use the standard requirements and 
the FAR--we----
    Mr. Thompson. So in other words, if you looked at another 
failed agency, the procurement standards are the same?
    Mr. Taylor. Correct.
    Mr. Thompson. So if you take an agency and combine it, all 
those agencies combined would use the same procurement 
standards? Am I correct?
    Mr. Taylor. They are supposed to, sir.
    Mr. Thompson. There we go. We are getting to the point. So 
if they don't use them, it is not the problem that we have used 
a different standard. It is just that some how the people who 
are doing it don't measure up.
    Mr. Taylor. Or it is the nature of the contract is that the 
oversight isn't structured to man these kind of contracts and 
the volume.
    Mr. Thompson. But the standard is the same?
    Mr. Taylor. Yes, sir.
    Mr. Thompson. Let us talk about a couple of items that GAO 
looked at. Mr. Hutton, you said that the Department kept 
inadequate record, the report. Can you elaborate a little bit 
on that if you care to?
    Mr. Hutton. Well, I will take it this way if you allow me. 
I think one key aspect of anything, if you really want to 
manage your acquisitions and get a handle on institutionally 
across the whole DHS enterprise how we are doing, you need good 
data. I think data is an issue we brought up in several of our 
reports. Just to throw out an example, we looked at 
performance-based service acquisitions, the extent to which DHS 
used them. If probably took us as long to get a handle on what 
the universe is as best we could so we could then go down and 
do drill-downs than might have taken to do the actual work? Why 
is that important?
    I think if you have data just in this one example on the 
use of performance-based service acquisitions, what that is 
doing is it allows you to begin getting a sense of, okay, how 
well are we doing with those, where are we using them, are we 
using certain contracting arrangements that don't make sense 
for those type?
    Ideally, you like to use fixed-price contracts. To what 
extent are we using time and materials for performance-based? 
You can only get that through data.
    Mr. Thompson. Right. Now, some of your suggestions, if I am 
correct, came from an earlier report and you just kind of 
updated it when you looked at the Department again and you 
found out in many respects the problem was still there.
    Mr. Hutton. If I could, sir. Data is, I believe, a very key 
part of really again assessing what you are doing and how well 
you are doing it. But I would be remiss not to mention that 
while it--clearly you can see it as an issue at DHS, it is 
really a Government-wide issue in terms of the data systems we 
have to manage our procurements and understand exactly what the 
Government is buying and how they are buying it. So while it is 
DHS-focused as the acquisition advisory panel and GAO pointed 
out, it is broader than DHS.
    Mr. Thompson. You know, for the record, Mr. Chairman, I 
would also just like to point out that, you know, we have had 
three procurement officers in 5 years. So, I mean, there is 
still a challenge to keep good people in the position long 
enough to follow some of what we are doing. Mr. Gunderson, I 
hope to see you around next year.
    Mr. Gunderson. I plan on being here.
    Mr. Thompson. Because part of the continuity of Government 
that we look at is having the same people in place long enough 
to get some things done. One of the concerns we hear too often 
is that every time people interface with the Department, it is 
a new face. In managing contracts, sometime, there is a 
different person handling a contract than before. So many times 
that business has to back up, bring that manager up to speed 
and it slows the contract down. Mr. Gunderson, one comment I 
will share with you. Some fellow agencies before a program 
manager can transfer to another agency or Government, they 
require that manager to meet certain tasks so that you just 
can't have a failed project and take another job and leave it 
to someone else's problem. Now, I think what the Department 
ought to look at, as an internal review is whether or not a 
policy is similar to that might provide a standard that would 
help both the Department and the contractors you are working 
with just as a suggestion.
    Mr. Gunderson. Understood.
    Mr. Thompson. Thank you, Mr. Chairman.
    Mr. Carney. Thank you, Mr. Chairman. Mr. Gunderson, what 
happened to a first procurement officer? We are on the third 
one now. What happened----
    Mr. Gunderson. Chief procurement officers. Greg Rothwell 
was the original chief procurement officer. He retired. I can't 
remember the exact time frame. The second one, Elaine Duke, has 
now been elevated to Under Secretary for Management, and 
certainly continues to champion our cause.
    Mr. Carney. Good. We had a good conversation with her 
yesterday and I encourage that relationship to continue. I 
think that she will provide sort of continuity after November 
that we are certainly going to need. I hope so certainly.
    Mr. Gunderson. Just to add on to that, a couple of examples 
of steps that she has taken in support of us in establishing 
this new framework, she has issued several memos this year for 
the entire Department, instituting some new policies and 
processes for the establishment of acquisition program based 
lines, life-cycle cost estimates and these all need to be 
reviewed by subject matter experts at the Department before 
these programs can advance.
    Mr. Carney. What is going to be the impact of the election 
on your shop, turnover-wise?
    Mr. Gunderson. Within the CPO office, I am not seeing it as 
any impact. We don't have any political appointees within our 
office. We are all career and from an operational standpoint, 
again, the folks that are doing the work at the components I am 
not anticipating an impact associated with the actual 
transition.
    Mr. Carney. The answer I was looking for is that you will 
educate those coming in as to what you need.
    Mr. Gunderson. Understood.
    Mr. Carney. Okay. Thank you very much. Mr. Rogers, any 
further questions?
    Mr. Rogers. One last question. I want to visit the issue of 
the failure of this Congress to pass an authorization bill and 
perhaps not even an appropriations bill. What impact do you 
see, if any, that may or may not have on the Department's 
ability in the area--subject matter area we have been talking 
about. Mr. Hutton, would you start first?
    Mr. Hutton. That is a difficult question for me to respond 
to because I haven't really considered it in that light.
    Mr. Rogers. Mr. Gunderson.
    Mr. Gunderson. We would request, or would like to have an 
authorization bill to provide more clarity and direction for 
where we should be going.
    Mr. Rogers. If you end up with nothing but a continuing 
resolution, what effect will that have on your ability to get 
your job done?
    Mr. Gunderson. It would impact in a couple of ways. From an 
operational programmatic standpoint, there would be no new 
starts that we would be able to move forward on. It would slow 
down possibly some of the program initiatives. It would 
increase the workload for the staff because you would have to 
be, in some cases, doing multiple administrative actions. Most 
importantly from my perspective and near and dear to this 
organization is the--the budget request that we have forward is 
to--would allow to strengthen our acquisition program 
management division, as well as our intern program, a CR would 
stop those programs in their tracks and we would not be able to 
grow the way that everybody is saying we need to grow.
    Mr. Rogers. Mr. Taylor.
    Mr. Taylor. I think the last area Mr. Gunderson spoke of is 
a critical area. But in general, CRs are extremely distracting 
for any organization. But in the case of DHS where the Congress 
has been increasing the budget and increasing the activities on 
an annual basis, it would--without going into any of the 
details of what specifically they couldn't do--it would 
obviously hinder their efforts to improve.
    Mr. Rogers. Thank you. That is all I have, Mr. Chairman.
    Mr. Carney. Thank you. I would like to thank the panels for 
the testimony and their questions and their answers. You stand 
dismissed. We will likely be sending you some written questions 
and we would like a prompt response. Thank you very much.
    Mr. Carney. I would like to welcome the witnesses, the 
second panel. Our first witness is Ms. Marcia D. Madsen. She 
served as the Chair of the acquisition advisory panel, a 14-
member advisory panel mandated by Congress to review Federal 
contracting laws, regulations and policy. Ms. Madsen has over 
20 years experience in Government contracting law. She has 
served as Chair of the ABA section of public contract law and 
was also President of the Board of Contract Appeals, Bar 
Association. Our second witness, Mr. Scott Amey, serves as 
general counsel for the Project on Government Oversight. 
Founded in 1981, POGO investigates and exposes corruption and 
other misconduct in order to achieve a more accountable Federal 
Government. Through its 27-year history, POGO has created a 
niche investigating, exposing and helping to remedy waste, 
fraud and abuse in Government spending.
    Our third witness, Mr. Mark Pearl is president and chief 
executive officer of homeland security and defense business 
council. Mr. Pearl previously served as a principal chairman of 
IT Policy Solutions, which he founded in 2003, and has recently 
been serving as executive director of the Consumer Electronics 
Retailers Coalition. His focus is public policy and Government 
relations expertise on technology and cyber security policy for 
more than a dozen years. Mr. Pearl's clients have included a 
wide range of Fortune 100 companies and CEO lead associations 
in all critical economic and infrastructure sectors. Prior to 
forming ITPS, Mr. Pearl was a partner and led the E-commerce 
policy practice group in the international law firm, Shaw, 
Piven, LLP. Without objection, the witnesses' full statements 
will be inserted into the record. I now ask each witness to 
summarize his or her testimony for 5 minutes beginning with Ms. 
Madsen.

  STATEMENT OF MARCIA G. MADSEN, CHAIR, ACQUISITION ADVISORY 
                             PANEL

    Ms. Madsen. Good afternoon, Chairman Carney, Congressman 
Rogers. Chairman Carney, I may take a small personal privilege 
and tell you that I worked for one of your predecessors more 
than 20 years and ago and I have a very soft spot in my heart 
for the 10th district of Pennsylvania, while I was in law 
school. I am here in my capacity today as chair of the 
Acquisition Advisory Panel, which was a group I was honored to 
chair today having finished that work. I am a lawyer in private 
practice. So I am kind of wearing 2 hats I Congress.[?] I am 
very pleased to be here today to talk about the panel's 
findings and recommendations. I think the Members of the 
committee and subcommittee have a copy of the panel's report.
    After almost 2 years of work, our report was published in 
July 2007 and many of those recommendations and made their way 
into law in last year's defense authorization bill or they are 
the subject actually of pending legislation, including the 
Lieberman-Collin's amendment to this year's bill. They are also 
the subject of several regulatory initiatives by the FAR 
council and OFPP. I think I have got about now 4 minutes to 
summarize our report which given the 89 recommendations and 
100+ findings might be a small challenge. But I will try give 
you at least a quick overview.
    Acquisition reform in the mid-1990's emphasized 
streamlining the procurement process and relying more on 
commercial items and services and processes and a substantially 
reduced acquisition work force. The Packard Commission, which 
was in 1986, the 800 Panel in 1993, had emphasized the 
Government's needs to attract technology and expertise in the 
private sector, and the national performance review in 1993 
pushed these changes which were enacted in the mid-1990's. Our 
panel was asked to look at many of these issues 10 years later 
and what we discovered was a complex landscape that had some 
unintended consequences, including the huge growth in 
procurement spending as a result of the war on terror and the 
Gulf Coast hurricanes in 2005.
    Just to give you one statistic from our report which is 
loaded with them, between fiscal year 2000 and 2005, Government 
purchasing increased 75 percent from $219 billion to more than 
$380 billion. Our report uses fiscal year 2004 statistics. That 
was the latest data we could get out of the acquisition, 
Federal procurement database. There was also a diminished work 
force. Just to give you an example, in the mid-1990's, the 
DOD's acquisition work force was cut by more than 50 percent. 
So we have spending going this way and work force in the 1990's 
going down, but flat--flat in the--after the turn of the 
century.
    As to the use of commercial practices, the evidence that 
our panel found was that the Government's practices, 
particularly for the acquisition of services by 2005 and 2006 
did not approach the rigor of the commercial marketplace 
ironically enough with respect to requirement, development, the 
use of competition, the use of fixed-price performance-based 
contracts. With respect to commercial practices, the panel 
learned from commercial buyers of technology and related 
services that the keys to success were early investment and 
requirements definition and competition. We were able to 
determine that in 2004, one third of the Government's 
procurement dollars were awarded noncompetitively and even when 
competed, the percent of dollars that were awarded when only 
one offer was received had more than doubled from 9 percent in 
2000 to 20 percent in 2005.
    We also believe that the amount of competition was likely 
understated--or the amount of noncompetitive orders was 
understated--because of the use of orders under multiple award 
contracts and we could not get data on the competitiveness of 
orders under multiple award interagency contracts for large 
IDIQs. So that wasn't available to us. In fiscal year 2004, 
about $142 billion of the total procurement spend of $338 
billion or 40 percent went through these interagency vehicles 
for which we could not get data on the competitiveness of the 
ordering process. We made a number of recommendations to 
improve competition that are set forth in the report, and I am 
happy to answer questions about those later.
    We also made recommendations to improve the interagency 
contracting process, including looking at whether all of those 
contracts are necessary and OFPP has work underway in that 
regard. With respect to the Federal acquisition work force, our 
panel determined that there was a significant mismatch between 
the demands placed on the acquisition work force and the 
personnel and skills that were available to meet those demands. 
But we realized that there was not reliable information about 
the size, composition and competencies of the Federal 
acquisition work force or the role of contractors in supporting 
that work force. Obviously one cannot understand trends without 
data. So we made a number of recommendations, starting with 
getting an accurate definition of the work force and data and 
human capital planning and I just want to note and I am happy 
to provide the committee with a copy of this. But we 
commissioned our own work force study. We could not get 
accurate data on the Federal acquisition work force. So we 
commissioned our own study. This is the executive summary of 
that study. We went back to the 1960's, we looked at every 
study of the acquisition work force and all of the data that 
had been collected; it is on 9 CDs. You are welcome to have it. 
I would be happy to answer more questions later, but we would 
be happy to provide you with this.
    [The statement of Ms. Madsen follows:]

                 Prepared Statement of Marcia G. Madsen
                           September 17, 2008

    Mr. Chairman, Congressman Rogers and Members of the subcommittee, I 
appreciate the opportunity to appear before you to address the 
Acquisition Advisory Panel's findings and recommendations. In addition 
to chairing this panel, I am a partner in the law firm of Mayer Brown 
LLP and I have more than 20 years of experience in Government 
procurement law.
    You asked me to testify regarding the panel's findings and 
recommendations, particularly with respect to best practices. I thought 
it would be helpful to provide an overview of the recommendations made 
by the Acquisition Advisory Panel and the progress toward 
implementation of the recommendations. My testimony could not possibly 
cover the panel's 100 findings and 89 recommendations in their 
entirety. However, I will try to provide a good overview regarding 
competition and adoption of commercial practices, the management and 
use of interagency contracts, acquisition work force challenges, 
opportunities for small businesses, and the appropriate role of 
contractors supporting the Government--the ``blended work force'' 
issues. I also will talk briefly about the panel's data 
recommendations.
    The Panel Report was published in draft form in January 2007 and 
was published in final form by GPO in July 2007. Since that time, many 
of the panel's recommendations have been enacted or are included in 
proposed legislation originating both in the House and the Senate. 
Several recommendations addressing competition under multiple award 
contracts and the acquisition work force were included in the National 
Defense Authorization Act for Fiscal Year 2008 (the 2008 DoD 
Authorization Act). Finally, as noted in the Government Accountability 
Office's (GAO's) December 2007 Report ``Oversight Plan Needed to Help 
Implement Acquisition Advisory Recommendations,'' the Office of Federal 
Procurement Policy (OFPP) agrees with almost all the panel's 
recommendations and has moved forward to implement many of them through 
changes in policy and regulation. DoD also has moved separately to 
implement several panel recommendations.
    The panel was established pursuant to Section 1423 of the National 
Defense Authorization Act For Fiscal Year 2004. Its members, balanced 
between the public and private sectors, were appointed in February 
2005. The panel held 31 public meetings and heard the testimony of 108 
witnesses representing 86 entities or groups from industry, Government, 
and public interest organizations. The panel's public deliberations 
produced approximately 7,500 pages of transcript. In addition, we 
received written public statements from over 50 sources, including 
associations, individual companies, and members of the public.
    I again would like to personally thank the 13 panel members for 
their dedication over the course of our deliberations. Each of them was 
a volunteer with a full-time and highly responsible position in 
``regular'' life. The panel conducted its work under significant 
constraints with respect to staff and money. We had only one full-time 
staff member, the Executive Director. We are grateful to GSA and to the 
Director of Defense Acquisition and Policy for making staff available 
on a temporary basis to the panel. The level of participation by the 
members in the hearings, in developing findings and recommendations, 
and in writing the report was substantial.
    The panel is grateful to the many witnesses and members of the 
public who helped shape the panel's report through their active 
participation and interaction with the panel. (There is a complete list 
of the witnesses in the appendices to the report.) The insight gained 
from the exchange with witnesses was invaluable. In many instances, 
approaches under consideration by the panel were revised or adjusted 
based on input from the witnesses who helped the panel see many 
different perspectives.
    To summarize, significant observations from the panel's work:
Requirements Definition and Acquisition Planning Enhance Competition
   Commercial buyers invest heavily in planning and 
        requirements analysis to obtain meaningful competition.
   Government practice focuses on rapid awards at the expense 
        of planning, competition and performance.
   The Government must invest time and resources to enhance its 
        ability to develop/maintain market expertise and define 
        requirements.
Competition Drives Innovation and Fair and Reasonable Prices
   Commercial practice relies on competition for innovation and 
        pricing.
   Government practice does not meet the standard commercial 
        practice for competition.
     Interagency Contracting:
       Incentives to compete lacking.
       Improve the ordering process competition and 
            transparency of data.
Increased Accountability and Transparency Will Improve Interagency 
        Contracting
   No consistent, Government-wide policy for agencies who 
        manage or use interagency contracts.
   Accountability and transparency lacking in interagency 
        contracting.
   Recommendations to require formal business cases to support 
        interagency contracts, greater accountability in their 
        management, and more transparent use.
Multiple Award Contracts Need to Provide More Opportunities for Small 
        Businesses
   Agencies should be authorized to reserve awards to small 
        businesses in full and open competition multiple award 
        procurements not suitable exclusively to small businesses.
   Ordering procedures under multiple award contracts, 
        including Federal Supply Schedules, should provide agencies 
        with explicit discretion to limit competition for orders to 
        small businesses.
The Acquisition Workforce Requires Immediate Attention
   Demands on the acquisition work force have outstripped its 
        capacity.
   An expedited assessment of the work force is needed in order 
        to improve capacity.
   Human capital planning and investment in the acquisition 
        work force are imperative.
Appropriate Role of Contractors Supporting the Workforce
   Management challenges of a ``blended'' work force.
     Blurring the distinctions between inherently governmental 
            and commercial functions.
     Rising concerns about:
       Organizational and personal conflicts of interest;
       Protection of contractor proprietary/confidential data.
     Recommendations to promote ethical/efficient use of 
            ``blended'' work force.

    ENHANCE COMPETITION BY INVESTING IN REQUIREMENTS DEFINITION AND 
                                PLANNING

    If there is one fundamental lesson to be learned from the panel's 
review of commercial practices, it is the critical role that 
requirements development plays in the successful acquisition of 
commercial services. Sound requirements development is the key to 
improving contractor performance and saving taxpayer dollars. Sound 
requirements development increases competition, reduces costs, 
eliminates time-and-materials contracts, and increases the likelihood 
of successful contract performance. Commercial buyers do it well. 
Government buyers need to improve. Today, Government spends more on 
services than on major weapons systems. That fact has significant 
implications for acquisition. As reflected in the panel's findings and 
recommendations, there are aspects in which the acquisition of services 
is different--or requires different skills and emphasis. Some of these 
aspects include the fact that technology-related services are sold in 
the private sector involving a wide variety of skills. Private sector 
buyers focus on bringing the right mix of skills together for a project 
and on the price of that project. The Government, tends to buy services 
on an hourly basis without adequate emphasis on the objection.
    Commercial Practice.--Meaningful competition, pricing, contract 
type, and terms and conditions all are dependent on the time and effort 
commercial firms invest in the preliminary requirements development 
stage. Commercial buyers see acquisition of services as major 
transactions that can improve an organization's performance and reduce 
its costs. The commercial buyers described a rigorous requirements 
definition and acquisition planning process. To them, requirements 
definition is of equal importance to the selection of the right 
contractor. These companies invest the time and resources necessary to 
clearly define requirements up-front in order to achieve the benefits 
of competition. They perform on-going rigorous market research and are 
thus able to provide well-defined, performance-based requirements 
conducive to innovative fixed-price solutions. They obtain a commitment 
on their requirements from all appropriate levels in the corporation.
    Government Practice.--The panel's work shows that the Government 
fails to invest in this phase of procurement, focusing instead on rapid 
awards. While at the conceptual level buyers appear to understand the 
importance of requirements definition to successful, cost-effective 
contracts, culture and the metrics focus on ``getting to award'' rather 
than contract results. In testimony, public sector officials and 
representatives of Government contractors expressed frustration that 
the Government is frequently unable to define its requirements 
sufficiently to allow for fixed-price solutions, head-to-head 
competition, or performance-based contracts.
    Ill-defined requirements fail to produce meaningful competition for 
services solutions. Instead, agencies often rely on time-and-materials 
contracts with fixed hourly rates that lack incentives for innovative 
solutions. The testimony was consistent that the major contributors to 
this problem are the cultural and budgetary pressures to quickly award 
contracts or orders, combined with a lack of market expertise in an 
already strained acquisition work force. The Government's lack of 
investment in acquisition planning is well-documented beyond the 
testimony heard by the panel. For instance, two audit reports from the 
Department of Defense Inspector General (DoD IG) that were reviewed by 
the panel found that of the $217 million spent under 117 awards 
reviewed, 116 lacked acquisition planning or market research.\1\
---------------------------------------------------------------------------
    \1\ DoD IG Report No. D-2007-007, ``FY 2005 Purchases Made Through 
the General Services Administration,'' Oct. 30, 2006, at 1-4 (general 
discussion of the issue); DoD IG Report No. D-2007-032, ``Report on 
Fiscal Year 2005 DoD Purchases Made Through the Department of 
Treasury,'' Dec. 8, 2006, at 32 (specific statistics cited).
---------------------------------------------------------------------------
    Recommendations: The panel recommendations are based on current 
commercial sector practices. For instance, to develop and maintain 
market expertise, the panel recommended that agencies establish 
``centers of expertise'' to protect their high-dollar investments in 
recurring or strategic requirements. The panel also saw a need for a 
central source of market research information comparable to that 
maintained by private companies. We recommended that the General 
Services Administration (GSA) establish such a capability to monitor 
services acquisitions by Government and commercial buyers, collect 
information on private sector transactions that is publicly available, 
as well as obtain information on Government transactions, and make this 
information available Government-wide. Under our recommendations for 
improving Performance-Based Acquisition (PBA), the panel recommended 
that OFPP provide more guidance to agencies regarding how to define 
requirements in terms of desired outcomes, how to measure those 
outcomes, and how to develop appropriate incentives for contractors to 
achieve those outcomes. Because defining needs/requirements up-front is 
one of the most critical aspects of a PBA, the panel recommended that 
the FAR require the Government to develop and provide to contractors a 
``baseline performance case.'' The panel's report contains details 
about what this baseline performance case would entail, but it is 
essentially a framework to provide discipline in the Government's 
requirements definition process. We also recommended an educational 
certification program for contracting officer representatives to help 
them become effective planners and monitors of PBAs. With respect to 
the concerns expressed by the GAO and Inspectors General (IGs) 
regarding ill-defined requirements for orders under interagency 
contracts, the panel recommended criteria for requirements planning by 
ordering agencies before access to an interagency contract is granted. 
OFPP has begun to implement these recommendations--for example, OFPP 
has tasked GSA to implement the panel's recommendation regarding market 
research.

   ENCOURAGE COMPETITION TO INCREASE INNOVATION AND PRODUCE FAIR AND 
                           REASONABLE PRICES

    Commercial Practice: In addition to learning that basic commercial 
practice involves substantial investment in requirements analysis, the 
panel also was advised that commercial buyers rely extensively on 
competition to produce innovation and fair and reasonable prices. In 
fact, competition is fundamental to producing innovation and to 
determining fair and reasonable prices. Because there is no substitute 
for competition, commercial companies rarely buy on a sole-source 
basis. In those rare cases where they do not seek or cannot achieve 
competition, commercial buyers rely on their own market research, 
benchmarking, and often seek data on similar commercial sales to 
establish fair and reasonable pricing. In some cases, they may even 
obtain certain cost-related data, such as wages or subcontract costs, 
from the seller to determine a price range. But commercial buyers 
generally find these methods far inferior to competition for arriving 
at the best price. As a result, they monitor non-competitive contracts 
closely, and eliminate such arrangements as soon as the requirement can 
be moved to a competitive solution.
    Government Practice: It is instructive to compare the strong 
commercial preference for competition to the Government's competition 
statistics. In fiscal year 2004, the Government awarded $107 billion, 
or over one-third of its total procurement dollars, non-competitively. 
Over one-fourth, or $100 billion, was awarded non-competitively in 
2005.\2\ The number of competitions that result in the Government only 
receiving one offer doubled between 2000 and 2005. Spending on services 
in both 2004 and 2005 accounted for 60 percent of procurement dollars 
with 20 percent and 24 percent awarded without competition, 
respectively.\3\
---------------------------------------------------------------------------
    \2\ Standard Competition Report from FPDS-NG, available on-line at 
https://www.fpds.gov under Standard Reports (last visited Jan. 29, 
2007). The competitive/non-competitive base (against which the 
percentage is derived) is $338 billion for fiscal year 2004 and $371.7 
billion for fiscal year 2005.
    \3\ FPDS-NG special reports for the panel.
---------------------------------------------------------------------------
    Interagency Contracting.--The panel believes the amount of non-
competitive awards may, in fact, be underreported for orders under 
multiple award contracts available for interagency use, generally known 
as ``interagency contracts.'' The panel's repeated attempts over 
several months to obtain information about the extent of competition 
for orders under these types of contracts were frustrated. The 
Government's database on Federal procurement spending, the Federal 
Procurement Data System--Next Generation (FPDS-NG) only began to 
collect data on interagency contracts in 2004. Due to a number of 
factors, including poor reporting instructions, faulty validations, and 
even DoD policy, the ``extent competed'' field in FPDS-NG for these 
orders overwhelmingly reflects the competitive nature of the master 
contract, rather than the actual level of competition for orders. This 
reporting problem skews the data such that it is unreliable. The lack 
of transparency into the nature of these orders is a significant 
weakness. FPDS-NG reports spending under contracts available for multi-
agency use at as much as $142 billion, or 40 percent of procurement 
spending, in fiscal year 2004.\4\
---------------------------------------------------------------------------
    \4\ Id.
---------------------------------------------------------------------------
    Despite the panel's overarching concern with data reliability and 
transparency, there certainly appears to be sufficient cause for 
concern in addition to these statistics. The panel was well aware that 
GAO put management of interagency contracting on its High Risk Series 
in 2005. Since the GAO high risk designation in 2005, more data 
regarding orders under these contracts has become available. In fact, 
in an audit report reviewed by the panel, the DoD IG found that 62 
percent of reviewed orders, totaling nearly $50 million, failed to 
provide a fair opportunity to compete as required by law. In addition, 
98 of 111 orders valued at $85.9 million were either improperly 
executed, improperly funded, or both.\5\
---------------------------------------------------------------------------
    \5\ DoD IG Report No. D-2007-023, ``FY 2005 Purchases Made Through 
the National Aeronautics and Space Administration,'' Nov. 13, 2006, at 
ii.
---------------------------------------------------------------------------
    The Panel's Report sets forth the history and efforts by Congress 
to improve competition. The intent of interagency contracts, most of 
which are assumed to be multiple award contracts, was to lower 
administrative costs, leverage buying power and provide a streamlined 
acquisition process--all well-meaning goals. Such contract vehicles 
were never intended to be used to avoid competition.
    Interagency contracts generally are indefinite-delivery/indefinite-
quantity type contracts with very broad scopes of work, most of which 
provide for multiple awardees that will compete with one another for 
specific orders at a later point when an agency identifies a 
requirement. Therefore, where services are concerned, the initial 
competition is based on loosely defined statements of the functional 
requirements resulting in proposals for hourly rates for various labor 
categories. The expectation is that once an agency identifies a 
specific need, a more clearly defined requirement will be provided at 
the order level allowing the multiple awardees to submit task-specific 
solutions and pricing. Because this process narrows the number of 
eligible contractors at the order level, Congress has insisted that 
these multiple awardees be given a ``fair opportunity'' to compete for 
the task orders.
    So why do interagency contracts seem to draw so much non-
competitive activity? There appear to be a number of checks and 
balances missing that would otherwise contribute to healthier 
incentives for competition.
    Incentives to Compete Lacking.--The panel found that there was no 
Government-wide requirement that all interagency contracts provide 
notification that a task order is available for competition. There was 
no visibility into sole-source orders, as there was no requirement for 
a synopsis or public notification for orders under multiple award 
contracts, regardless of the size of the order. Even where a best value 
selection is made at the order level, there was no requirement for a 
detailed debriefing, regardless of the amount of the order or the 
amount of bid and proposal costs expended by the eligible contractor, 
thus denying the contractor information that might enable it to be more 
competitive on future orders/contracts. Further, without regard to size 
of the order, there was no option for contractors to protest the 
selection process under multiple award contracts, reducing the pressure 
on the Government to clearly define requirements, specify its 
evaluation criteria, and make reasonable trade-off decisions among 
those criteria. For example, even issues that affect the integrity of 
the competitive process such as organizational or personal conflicts of 
interest could not be protested.
    However, the panel also took testimony from agency officials who 
told us they could not meet their missions without the use of 
interagency contracts. Therefore, the panel sought to achieve a balance 
in its recommendations that would introduce incentives to encourage 
more competition while not unduly burdening these tools for streamlined 
buying. For instance, some of our recommendations only apply to orders 
over $5 million. Why this threshold? We found that of the $142 billion 
spent on orders under these interagency contracts in fiscal year 2004, 
$66.7 billion, nearly half, was awarded in single transactions (at the 
order level) exceeding $5 million. The fiscal year 2005 statistics show 
total spending on these contracts at $132 billion with $63.7 billion in 
single transactions over $5 million.\6\
---------------------------------------------------------------------------
    \6\ FPDS-NG special reports for the panel.
---------------------------------------------------------------------------
    Nearly half of the dollars are spent on single transactions over 
this threshold, but the majority of transactions are actually below it. 
By using this threshold, we were able to impact a significant dollar 
volume, but not the majority of transactions. ``Bite-sized'' orders for 
repetitive needs can be placed using the current methods under this 
threshold, while large transactions involving the need for requirements 
in a Statement of Work, evaluation criteria, and best value selection 
procedures would be subject to a higher level of competitive rigor.
    Recommendations: The panel recommended expanding Government-wide 
the current DoD Section 803 requirements that include notifying all 
eligible contractors under multiple award contracts of order 
opportunities. We also recommended that the 803 procedures apply to 
supplies and services. And while we agreed that a pre-award 
notification of sole-source orders might unduly burden the ordering 
process, the panel recommended post-award public notification of sole-
source orders finding that it would improve transparency. For single 
orders exceeding $5 million, the panel recommended that agencies adhere 
to a higher competitive standard by: (1) Providing a clear statement of 
requirements; (2) disclosing the significant evaluation factors and 
subfactors and their relative importance; (3) providing a reasonable 
response time for proposal submissions; and (4) documenting the award 
decision and the tradeoff of price/cost to quality in best value 
awards. We also recommended post-award debriefings for disappointed 
offerors for orders over $5 million when statements of work and 
evaluation criteria are used. Concerned that the Government is buying 
complex, high-dollar services without a commensurate level of 
competitive rigor, transparency, or review, we recommended limiting the 
statutory restriction on protests of orders under multiple award 
contracts to orders valued at $5 million or less. Of course, it should 
be noted that under existing law, any order under the GSA Schedules may 
be protested.
    Specific to the GSA Federal Supply Schedules program, the panel 
recommended a new services schedule for information technology that 
would require competition at the task order level and reduce the burden 
on contractors to negotiate up-front hourly labor rates with GSA. The 
panel sees the exercise of negotiating (and auditing) labor rates as 
producing little in the way of meaningful competition given that 
solutions are project-specific and the price depends on the actual 
labor mix applied. In such cases, analyzing labor rates contributes 
little to understanding the price that the Government will pay for the 
project. Much time and effort are wasted by GSA and contractors in 
providing and auditing labor rates that do not provide useful 
information about the costs of a project.
    The 2008 DoD Authorization Act adopted the panel's recommendations 
requiring enhanced competition requirements and post-award debriefings 
for task orders exceeding $5 million. The 2008 DoD Authorization Act 
also authorized bid protests for task orders exceeding $10 million (the 
panel had recommended a $5 million threshold). In addition, S. 680 and 
other measures currently under consideration in connection with the 
fiscal year 2009 DoD Authorization Bill would extend the Section 803 
ordering procedures for the Federal Supply Schedules, Government-wide. 
At the same time OFPP has opened FAR Cases implementing several of the 
panel competition recommendations.

 ACCOUNTABILITY AND TRANSPARENCY INADEQUATE FOR INTERAGENCY CONTRACTING

    The panel also separately addressed the issues of management of, 
accountability for, and transparency of interagency contracts. We 
included in our review the practice of using assisting entities that 
buy from interagency contracts. The panel found that while some 
competition among interagency contracts is desirable, there is no 
coordination regarding the creation or continuation of these contract 
vehicles to determine whether their use is effective in leveraging the 
Government's buying power or whether they have proliferated to the 
point of burdening the acquisition system. The panel also was concerned 
that recent focus on the problems of interagency contracting would 
result in an increase of so-called ``enterprise-wide contracts.'' Such 
contracts are operationally the same as interagency contracts, except 
they are restricted for use by one agency. The panel found the trend 
toward such contracts to result in costly duplication if the existing 
problems with interagency contracts can be addressed through better 
management discipline and a more transparent competitive process.
    Recommendations: Specifically, the panel found that the lack of 
Government-wide policy regarding the management of interagency 
contracts is a key weakness that can be addressed by OFPP. OFPP is well 
along in the development of just such a policy. (As the panel was 
developing its findings and recommendations in this area, panel members 
met with OFPP to provide input regarding the panel's work.) The panel 
also recommended that agencies, under policy guidance issued by OFPP, 
formally approve the creation, continuation, or expansion of 
interagency contracts using a formal business case. Agencies managing 
these contracts would, among other things, be required to identify and 
apply the appropriate resources to manage the contract, clearly 
identify the roles and responsibilities of the participants, and 
measure sound contracting procedures. As discussed above, there is 
little visibility into the numbers and use of interagency contracts. 
The data must be derived from FPDS-NG and is not, as discussed earlier, 
completely reliable. Therefore, the panel made a number of 
recommendations to improve the transparency and reliability of data on 
interagency contracts.
    S. 680 includes panel recommendations regarding management of 
interagency contracts. At the same time, OFPP is working toward 
implementing management policies and procedures for the creation, 
continuation and operation of interagency contracts.

   PROVIDING OPPORTUNITIES FOR SMALL BUSINESSES UNDER MULTIPLE AWARD 
                               CONTRACTS

    Although not included in the topics specified in Section 1423 of 
SARA, the panel decided early on that because its recommendations 
likely would impact small businesses it needed to include an 
examination of small business issues in its work. The growth in 
multiple award contracts has created particular challenges for small 
businesses. The panel recognized the positive efficiencies of multiple 
award contracts, especially those available for multi-agency use. 
However, the goal of efficiency must be balanced against the negative 
impact these contracts can have on small business opportunities. The 
panel found that multiple award contracts often have a broad scope of 
work, geographically, functionally, or both, and that these broad 
scopes of work make it extremely difficult for small businesses 
competing against large businesses under full and open competition for 
multiple awards. Further, when small businesses do receive awards under 
multiple award contracts, there is no specific statutory or regulatory 
authority for agencies to reserve orders under multiple award contracts 
for small business competition to achieve agency small business goals.
    Recommendations: The panel recommended specific statutory 
amendments that would allow contracting officers to reserve, for small 
business competition only, a portion of the multiple awards in a full 
and open competition not suitable for a total small business set-aside. 
The panel also recommended express statutory or regulatory authority to 
reserve orders, at the explicit discretion of the ordering agency, 
under multiple award contracts for competition among the small business 
multiple awardees only. These authorities will provide contracting 
officers with greater flexibilities in using multiple award contracts 
to meet agency small business goals. To date, there has been little 
movement in addressing these recommendations.
    The panel considered mandatory reserves or set-asides of orders but 
instead recommended providing agencies with the discretion to reserve 
orders in order to meet small business goals. Agency discretion is 
consistent with the flexibility and inherent efficiency of multiple 
award contracts. That discretion, when combined with the flexibility of 
multiple award contracts can create an effective tool for creating 
opportunities for small business. For example, the panel considered the 
record of the Federal Supply Schedule program, which has been one of 
the most successful contracting programs for small businesses programs, 
with small businesses receiving over 36 percent of the dollar value of 
orders over the last 5 years. The Federal Supply Schedule does not have 
mandatory set-asides for orders. However, under the Federal Supply 
Schedule, agencies do have the discretion to consider socio-economic 
status during the ordering process.
    A related issue is contract bundling. The panel found inconsistent 
implementation of contract bundling requirements across the Government. 
The panel recommended additional training and the creation of an 
interagency group to develop best practices and strategies to unbundle 
contracts and mitigate the effects of contract bundling. S. 2300 adopts 
this recommendation requiring a report on best practices to reduce 
bundling, followed by the issuance of additional policies to reduce 
bundling.

         THE ACQUISITION WORKFORCE REQUIRES IMMEDIATE ATTENTION

    The panel determined that a quantitatively and qualitatively 
adequate work force is essential to the successful operation of the 
acquisition system. But the demands on the acquisition work force have 
outstripped its capacity. Just since 9/11, the dollar volume of 
procurement has increased by 63 percent. While the current work force 
has remained stable since 2000, there were substantial reductions in 
the 1990's accompanied by relatively little new hiring. Compounding the 
problem, while a variety of simplified acquisition techniques were 
introduced by the 1990's acquisition reforms for low dollar value 
procurements, higher dollar procurements require greater sophistication 
by the Government buyer due to the growth in best value procurement, 
the emphasis on past performance, and the use of commercial 
contracting. Accompanying these trends is the structural change in what 
the Government is purchasing, with an emphasis on high dollar, complex 
technology-related solutions. However, due to the lack of a consistent 
definition of the work force and lack of ability to measure the work 
force, as well as the lack of competency assessments and systematic 
human capital strategic planning, determining the needs of this work 
force is difficult. The panel was very frustrated by the lack of useful 
and meaningful data regarding the Federal acquisition work force and 
undertook its own study--dating back to the 1960's in an effort to 
obtain information on the size, composition and skills of the work 
force.
    The panel was struck by the difference from commercial practice. 
Private sector buyers of services invest in extremely well-qualified 
employees and consultants to define their requirements, design, and 
carry out their acquisition of services. Larger acquisitions--$10 
million and up--are subject to a tightly controlled and carefully 
structured process overseen by highly credentialed and experienced 
buyers.
    Recommendations: An accurate understanding of the key trends about 
the size and composition of the Federal acquisition work force cannot 
be obtained without using a consistent benchmark. The panel recommended 
that OFPP prescribe a consistent definition and methodology for 
measuring the work force. The urgency of this task is reflected in 
another recommendation that OFPP collect data using this definition and 
measuring methodology within 1 year of the panel's final report. 
Consistent with this, OFPP should be responsible for creating and 
maintaining a mandatory Government-wide database for members of this 
work force. The panel noted that the Commission on Government 
Procurement recommended just such a system over 30 years ago--in 1972. 
While there are a great many recommendations for work force improvement 
in the panel's report, one of the key recommendations is that each 
agency must engage in systematic assessment and human capital strategic 
planning for its acquisition work force. Without such plans, it is 
impossible to know how and to what extent a given agency's work force 
is deficient. It is also difficult to know to what extent and how 
efficiently agencies are using contractors to support the acquisition 
function. In support of these recommendations, the panel has also 
suggested that these plans be reviewed by OFPP for trends, best 
practices, and shortcomings as part of an agency's overall human 
capital planning requirements. Finally, the panel recommended an SES-
level position be established within OFPP responsible for acquisition 
work force programs, a Government-wide intern program, as well as the 
reauthorization of the SARA training fund. I am pleased to note that 
the 2008 DoD Authorization Act included a number of these 
recommendations that are now law. Most importantly, the 2008 DoD 
Authorization Act requires the Chief Acquisition Officers for each 
agency, in coordination with OFPP, to develop human capital succession 
plans for the acquisition work force. DoD completed a comprehensive 
assessment of its acquisition work force in June 2007, an assessment 
that is being used to develop a strategic human capital plan for its 
acquisition work force.
    OFPP also recently conducted a Government-wide competency survey 
assessing the skills of the civilian acquisition work force. OFPP 
received over 5,400 responses to the survey, approximately half the 
civilian acquisition work force. OFPP has communicated the results of 
the survey to the respective agency Chief Acquisition Officers for 
human capital strategic planning purposes and closing skill gaps. OFPP 
currently has another survey under way. Two important steps have been 
taken to invest in the future of the acquisition work force. The 2008 
DoD Authorization Act created the Defense Acquisition Workforce 
Development Fund for the recruitment, training, and retention of 
acquisition personnel. The 2008 DoD Authorization Act also made 
permanent the Acquisition Workforce Training Fund managed by OFPP and 
GSA. The Acquisition Workforce Training Fund supports Government-wide 
training of the acquisition work force through the Federal Acquisition 
Institute.

        APPROPRIATE ROLE OF CONTRACTORS SUPPORTING THE WORKFORCE

    Management challenges of a ``blended'' work force: The panel heard 
testimony regarding the use of and management of the ``blended'' work 
force, where contractors work side-by-side with Government employees, 
often performing the same or similar functions.
    Blurring the Distinctions.--During the 1990's, the Federal 
acquisition work force was reduced substantially. For example, DoD's 
acquisition work force was reduced by nearly 50 percent during that 
time. The structural changes in what and how much the Government is 
buying since 9/11 have left agencies with no alternative to using 
contractors to deal with the pressures of meeting mission needs and 
staying within hiring ceilings. Agencies have contracted for this 
capability and contractors are increasingly performing the functions 
previously performed by Federal employees. To a significant degree, 
this has occurred outside of the discipline of OMB Circular A-76, with 
the result that there is no clear and consistent Government-wide 
information about the number of people and the functions performed by 
this growing cadre of service providers.
    While the A-76 outsourcing process provides a certain discipline in 
distinguishing between ``inherently governmental'' and commercial 
functions, it is less clear if and how agencies apply these concepts to 
the blended or multi-sector work force that has arisen outside of the 
A-76 process. The challenge is determining when the Government's 
reliance on contractor support impacts the decisionmaking process such 
that the integrity of that process may be questionable. A second 
challenge that arises is how the Government effectively manages a 
blended work force given the prohibition on personal services.
    Rising Concerns.--The panel identified the increased potential for 
conflicts of interest, both organizational and personal, as a 
significant challenge that arises from the blended work force and from 
the consolidation in many sectors of the contractor community. 
Alongside this issue is the need to protect contractor proprietary and 
confidential data in such an environment when a contractor supporting 
one agency in a procurement function may be competing against other 
contractors for work that is in the subject area of its support 
contract at another agency.
    Recommendations: The panel recommended that OFPP update the 
principles for agencies to apply in determining which functions must be 
performed by Federal employees, so that agencies understand that such 
principles apply even outside the A-76 process. Agencies need to 
identify and retain core functional capabilities that allow them to 
properly perform their missions and provide adequate oversight of 
agency functions performed by contractors. Agencies must ensure that 
the functions identified as those which must be performed by Government 
employees are adequately staffed with Federal employees.
    The panel did not see a need for new statutes. Instead, it viewed 
the issues as contract-specific and suggested that the better approach 
would be policy guidance and new solicitation and contract clauses. 
Therefore, the panel recommended that in its unique role as developer 
of Government-wide acquisition regulations, the FAR Council review 
existing conflict of interest rules and regulations, and to the extent 
necessary, create new, uniform, Government-wide policy and clauses 
regarding conflicts of interest, as well as clauses protecting 
contractor proprietary and confidential data. In particular, the rules 
regarding organizational conflicts of interest need to be updated to 
address situations involving impaired objectivity. The panel also 
recommended that the FAR Council work with the Defense Acquisition 
University and the Federal Acquisition Institute to devise improved 
training for contracting officers to assist in identifying and 
addressing potential conflicts and to develop better tools for the 
protection of contractor proprietary and confidential data. OFPP and 
the FAR council have opened several FAR cases to provide additional 
guidance regarding organizational and personal conflicts of interest, 
the protection of contractor proprietary and confidential data, as well 
as new training on the identification and resolution of conflicts of 
interest. Pending legislation also addresses these issues.

                               CONCLUSION

    Mr. Chairman, Congressman Rogers, and Members of the subcommittee, 
thank you for your interest in the panel's efforts. We are available to 
provide any additional information or assistance that the committee or 
the staff may need.
    This concludes my prepared remarks. I am happy to answer any 
questions you might have.

    Mr. Carney. Thank you, I think.
    Mr. Amey, for 5 minutes please.

STATEMENT OF SCOTT AMEY, GENERAL COUNSEL, PROJECT ON GOVERNMENT 
                           OVERSIGHT

    Mr. Amey. Yes. Good afternoon, Chairman Carney, Ranking 
Member Rogers and Members of the subcommittee. Thank you for 
inviting me to testify about the state of DHS contracting. I am 
Scott Amey, general counsel of the Project on Government 
Oversight, a nonpartisan public interest group. Over the years, 
particularly in the 1990's, many acquisition forms were 
implemented. The problems created by the reforms became starkly 
apparent after the beginning of the war on terror and after 
Hurricane Katrina. Those have shown that contracting decisions 
were placing taxpayer dollars at risk and sometimes lives at 
risk as well.
    Last week we were in a meeting with the DHS insider and we 
were all reminded of the build-up in the Defense Department in 
the 1980's and many of the contracting snafus that occurred. My 
fear is that DHS is repeating some of the same mistakes, poor 
planning, poor contract administration and oversight and the 
result will be the same. Lost taxpayer dollars. If the problems 
with DHS spending are not corrected, POGO believes that the 
next management or IT contract will mirror the misspending 
characterized by the $436 hammer and the $7,000 coffee pot.
    As a point of reference, the Government spends $465 billion 
on contracts for goods and services in fiscal year 2007. No-bid 
contracts are a rarity in the private sector which was 
evidenced in the acquisition advisory panel report have become 
commonplace in Government. One-bid offers account for 20 
percent of the competed contract spending. Government-wide bid 
protests are being sustained at a level of 27 percent, which 
indicates that contracting mistakes are being made. DHS 
spending has increased from approximately $4 billion in 2003 to 
$12 billion in 2007. That is a $3 billion decrease from the 
number in 2006, which was well over, I think, $15 billion. DHS 
sole-source spending is about 20 percent. I know you guys asked 
some questions. USA.gov has pie charts and all those graphics 
for you. It is all there now. But that number doesn't include 
contract spending that occurs without what we consider genuine 
competition.
    There are few encouraging trends with DHS contracting. They 
are using risky contract vehicles, a little less. They have 
also met their 23 percent small business goal. But we--and we 
also applaud DHS for its movement to restore accountability and 
integrity to the Deepwater program. Nevertheless, POGO has many 
concerns. DHS fixed-price contracting is down, which places 
taxpayer dollars at risk. Moreover, as this subcommittee has 
found, nearly $15 billion has been wasted in 11 DHS programs. 
That certainly is the tip of the iceberg for those programs as 
well as DHS overall.
    This is news and is the kind of a fallout of a full 
committee report that was put out last year that had given did 
DHS poor grades for emergency planning and procurement. The GAO 
and IG confirm those findings documenting problems with DHS's 
internal control, financial system, human capital and 
contracting systems that must be improved to prevent waste, 
fraud, and abuse.
    I would like to highlight kind of two contracting problems 
that we saw. The first was during Hurricane Katrina, rather 
than going to the GSA schedules and buying rent-a-cars or 
leasing rent-a-cars through them, they actually set up their 
own contracts. Rather than paying about $600 per month off of 
the schedules and even less if the contracting officer could 
have even drilled down and gotten a better price, GSA set up a 
contract for 18 vehicles at $936 per month. I called one of the 
vendors on the schedule and asked why they weren't chosen. They 
were as confused as I was and said we were willing, ready, and 
able to provide GSA with those cars.
    More troublesome was a comparison that POGO did after the 
first anniversary of Hurricane Katrina. We compared and took a 
look at some of the issues that were found after Hurricane 
Andrew back in 1992. The GAO report actually had cut and pasted 
language from one report to the next. So even though there was 
a 13-year difference, we ended up, see, they didn't implement 
the lessons learned from one report it another. That is one 
reason where you asked earlier is this really just a people 
issue, is this an acquisition work force issue? I think there 
are more systemic problems here that we need to worry about. 
The other problem is GSA--DHS contractors are obviously lining 
up to get a piece of this pie.
    When they have seen the amount of money explode, go through 
the roof. There are seminars right now being given in the 
industry on how to get a piece of that pie, how to get around 
competition and how to know who contracting officers are to get 
the best bang for your buck in the industry. Another case that 
we have seen is an SBInet subcontractor employee contacted POGO 
and said, ``that his subcontracting employer is the poster 
child of Government waste.'' He adds that they are merely 
providing bodies to build more contracts and that they are not 
spending money, they are told they are not spending money fast 
enough.
    POGO has also concerns with risky contractors continuing to 
get DHS money. We have issues with the revolving door. We are 
hearing a number of cases with the revolving door as well as 
with outsourcing within DHS that we are very concerned with. In 
my written testimony that I provided, we provided, I think, 10 
different recommendations from everything from competition to 
looking at certain risky contract vehicles. So I ask the 
subcommittee to take a look at those. I am more than happy to 
answer any other questions that the subcommittee may have. 
Thank you.
    [The statement of Mr. Amey follows:]

                    Prepared Statement of Scott Amey
                           September 17, 2008

    Good morning, Chairman Carney, Ranking Member Rogers, and Members 
of the subcommittee.
    Thank you for inviting me to testify today about the state of 
Department of Homeland Security contracting. I am Scott Amey, General 
Counsel and Senior Investigator with the Project On Government 
Oversight (POGO), a nonpartisan public interest group. Founded in 1981, 
POGO investigates and exposes corruption and other misconduct in order 
to achieve a more accountable Federal Government.\1\
---------------------------------------------------------------------------
    \1\ For more information on POGO, please visit www.pogo.org.
---------------------------------------------------------------------------
    Throughout its 27-year history, POGO has created a niche in 
investigating, exposing, and helping to remedy waste, fraud, and abuse 
in Government spending. One of POGO's most celebrated investigations 
uncovered outrageously overpriced military spare parts such as the 
$7,600 coffee maker and the $436 hammer. Since that time, particularly 
in the 1990's, many acquisition reforms have been implemented. The 
reforms, however, were not all they were cracked up to be. The problems 
created by the reforms became starkly apparent after the beginning of 
the Afghanistan and Iraq Wars, and after Hurricane Katrina devastated 
the Gulf Coast. These events showed that contracting decisions were 
placing taxpayer dollars--and sometimes lives--at risk.
    The war on terror and the post-hurricane recovery and 
reconstruction effort also highlighted how drastically different the 
Federal Government's contracting landscape is now from what it was in 
past decades. Contracting dollars have increased, oversight has 
decreased, the acquisition work force is stretched thin, and spending 
on services now outpaces spending on goods. (Because the return on 
services is more difficult to quantify than on goods, contracting is 
even more vulnerable to waste, fraud, and abuse.) If the problems with 
the contracting process are not corrected now, POGO believes the next 
consulting, management, or information technology contract will mirror 
the misspending characterized by the hammers and coffee makers in the 
mid-1980's. We provide the following procurement history and 
recommendations as a roadmap to assist Congress in better overseeing 
the use of taxpayer dollars.

                            CONTRACTING PAST

    The 1980's witnessed some of the strongest pro-taxpayer contracting 
reforms implemented to date. During the decade, the Competition in 
Contracting Act (CICA) was passed,\2\ the Cost Accounting Standards 
(CAS) Board was reestablished,\3\ the False Claims Act was 
strengthened,\4\ and there was a greater emphasis placed on the Truth 
in Negotiations Act (TINA).\5\ Those actions increased competition in 
contracting, provided uniformity in contractor accounting practices, 
prevented fraud, and allowed the Government to review contractor cost 
or pricing data to ensure taxpayer dollars were being spent wisely.
---------------------------------------------------------------------------
    \2\ 10 U.S.C.  2304(a)(1) (applicable to DOD); 41 U.S.C.  
253(a)(1) (applicable to other executive agencies); 41 U.S.C.  403(6) 
(definition of ``full and open competition'').
    \3\ The Board's regulations are codified at 48 CFR, Chapter 99. See 
FAR Part 30 (Cost Accounting Standards Administration).
    \4\ The False Claims Act (31 U.S.C.  3729-3733) was originally 
passed in 1863 at the urging of President Abraham Lincoln, who was 
attempting to halt the Civil War profiteering that was crippling the 
Union Army. Amendments to the Act in 1986, championed by Senator 
Charles Grassley (R-IA), increased the penalties for fraud and 
encouraged private citizens to come forward if they were aware of 
corporations defrauding the Government.
    \5\ 10 U.S.C.  2306a, 41 U.S.C.  254b.
---------------------------------------------------------------------------
    In the 1990's, the Clinton Administration's effort to reinvent 
Government so that it operated more like the private sector and 
decrease contracting red-tape succeeded to a point. But acquisition 
reform--which was part of reinventing Government--resulted in several 
laws that made Government contracts more susceptible to misconduct, 
cost more, and get results contractors care about rather than making 
the Government ``work better, cost less, and get results Americans care 
about.''\6\ Those laws reduced contract oversight, making it difficult 
for Government investigators and auditors to find waste, fraud, and 
abuse,\7\ and created risky contracting vehicles that often place 
public funds at risk.
---------------------------------------------------------------------------
    \6\ The Clinton-Gore initiative was known as the ``National 
Performance Review'' and the ``National Partnership For Reinventing 
Government.'' Available at http://govinfo.library.unt.edu/npr/
index.htm.
    \7\ The Federal Acquisition Streamlining Act of 1994 (FASA) (Public 
Law 103-355), the Federal Acquisition Reform Act of 1996 (FARA) (Public 
Law 104-106), and the Services Acquisition Reform Act of 2003 (SARA) 
(Public Law 108-136).
---------------------------------------------------------------------------
    Finally, ``best value contracting''\8\ further swung the pendulum 
away from protecting taxpayers and allowed contracts to be steered to 
well-connected, influential, and sometimes undeserving contractors.
---------------------------------------------------------------------------
    \8\ ``Best value'' contracting had been used in certain instances, 
but was added to the Federal Acquisition Regulation (FAR) in August 
1997. A policy debate continues pitting ``low price'' against ``best 
value'' as the preferred method for buying goods and services. Buying 
goods and services at the ``lowest practical cost'' would allow for 
some buying flexibility and provide a more objective criteria that 
would prevent the unjustified steering of contracts to non-responsible, 
questionable, or politically connected companies.
---------------------------------------------------------------------------
                          CONTRACTING PRESENT

    Simply stated, the contracting landscape has drastically changed in 
recent years and the Government must do a better job to ensure that 
taxpayer dollars are spent wisely. Federal contract spending has 
dramatically increased while Government control, competition, and 
oversight has been reduced. This recipe bodes ill for taxpayers, which 
is demonstrated by the problems below.
The Big Picture
   Contract spending for goods and services has doubled in 
        recent years, increasing from $219 billion in fiscal year 2000 
        to over $465 billion in fiscal year 2007.\9\
---------------------------------------------------------------------------
    \9\ Federal Procurement Data Service--Next Generation, ``Trending 
Analysis Report for the Last 5 Years'' and ``List of Agencies 
Submitting Data to FPDS-NG,'' as of September 4, 2008. Available at 
http://www.fpdsng.com/downloads/top_requests/
FPDSNG5YearViewOnTotals.xls and http://www.fpdsng.com/downloads/
agency_data_submit_list.htm.
---------------------------------------------------------------------------
   The Federal Government is spending more on services than 
        goods.\10\
---------------------------------------------------------------------------
    \10\ Acquisition Advisory Panel, ``Report of the Acquisition 
Advisory Panel to the Office of Federal Procurement Policy and the U.S. 
Congress,'' December 2006, ``Introduction,'' pp. 2-3. Available at 
http://www.acqnet.gov/comp/aap/documents/DraftFinalReport.pdf. 
Hereinafter ``1423 Panel Report.''
---------------------------------------------------------------------------
   No-bid contracts, a rarity in the private sector,\11\ have 
        become commonplace in the Government. Nearly 40 percent of all 
        contract spending is awarded without competition.\12\
---------------------------------------------------------------------------
    \11\ 1423 Panel Report, ``Executive Summary,'' p. 2.
    \12\ 1423 Panel, ``Findings and Recommendations on Data,'' August 
10, 2006, pp. 3-4. Hereinafter ``1423 Panel Data.'' Available at http:/
/www.acqnet.gov/comp/aap/documents/
Data%20Findings%20and%20Recommendations%20Charts%2008%2010%2006.pdf. 
See percentages in USAspending.gov, at http://www.usaspending.gov/fpds/
tables.php?tabtype=t1&rowtype=a&subtype=p&sorttype=2007.
---------------------------------------------------------------------------
   In addition, one-bid offers account for 20 percent of 
        ``competed'' contract spending.\13\
---------------------------------------------------------------------------
    \13\ 1423 Panel Data, at p. 7.
---------------------------------------------------------------------------
   The Government is relying on contractors to execute jobs 
        once performed by civil servants, including policymaking and 
        budgetary decisions.\14\ The Federal contracting work force, 
        depending on the definition that you use, has leveled off since 
        the mid-1990's.\15\
---------------------------------------------------------------------------
    \14\ See FAR Subpart 7.503. Available at http://www.arnet.gov/far/
current/html/Subpart percent207_5.htm.#wp1078196.
    \15\ 1423 Panel Report, p. 3.
---------------------------------------------------------------------------
   The vastly expanded definition of ``commercial item'' has 
        resulted in decreased oversight of and accountability for 
        contractors because they no longer have to provide certified 
        cost or pricing data for the ``commercial'' goods or 
        services.\16\
---------------------------------------------------------------------------
    \16\ Commercial item contracts have increased from $23 billion in 
2005 to nearly $31 billion in 2006. Available at http://www.fpdsng.com/
downloads/FPR_Reports/2005_fpr_section_III_agency_views.pdf (p. 6 of 
205) and http://www.fpdsng.com/downloads/FPR_Reports/
2006_fpr_section_III_agency_views.pdf (p. 6 of 201).
---------------------------------------------------------------------------
   Interagency contracting continues to increase--GSA schedule 
        sales totaled $35.1 billion in fiscal year 2006.\17\ Although 
        interagency contracts provide agencies flexibility to purchase 
        commonly required goods and services, which can save taxpayers 
        money, they are also risky and prone to abuse. Monitoring and 
        oversight have been very poor and competition has been 
        lacking.\18\
---------------------------------------------------------------------------
    \17\ GAO Report (GAO-07-310), High-Risk Series: An Update, January 
2007, p. 77. Available at http://www.gao.gov/new.items/d07310.pdf.
    \18\ Id.
---------------------------------------------------------------------------
   The Government recovered $2 billion in settlements and 
        judgments in cases involving allegations of fraud against the 
        Government in fiscal year 2007 and has recovered more than $20 
        billion since 1986.\19\
---------------------------------------------------------------------------
    \19\ DOJ Press Release (07-873), ``Justice Department Recovers $2 
Billion for Fraud Against the Government in fiscal year 2007; More Than 
$20 Billion Since 1986,'' November, 1, 2007. Available at http://
www.usdoj.gov/opa/pr/2007/November/07_civ_873.htm.
---------------------------------------------------------------------------
   Bid protest sustain rates (when GAO agrees that a contract 
        was awarded improperly) are 27 percent,\20\ which illustrates 
        that flawed contract award decisions both honest and egregious 
        are being made at a troubling rate.
---------------------------------------------------------------------------
    \20\ GAO Report (GAO-08-247R), Letter to The Honorable Nancy Pelosi 
Speaker of the House of Representatives, December 10, 2007, p. 2. 
Available at http://www.gao.gov/special.pubs/bidpro07.pdf.
---------------------------------------------------------------------------
Homeland Security
   DHS contract spending has increased from $3.4 billion in 
        fiscal year 2003 to $12.2 billion in fiscal year 2007.\21\ DHS 
        spent $11 billion on contracts in fiscal year 2008 thus 
        far.\22\
---------------------------------------------------------------------------
    \21\ FPDS-ND, ``List of Agencies Submitting Data to FPDS-NG,'' as 
of September 4, 2008. Available at http://www.fpdsng.com/downloads/
agency_data_submit_list.htm.
    \22\ Id.
---------------------------------------------------------------------------
   The use of sole source contracts decreased from 
        approximately 40 percent in fiscal year 2006 to 20 percent in 
        fiscal year 2007.\23\ Sole source contracts might decrease 
        again in 2008 currently only 14 percent.\24\
---------------------------------------------------------------------------
    \23\ USAspending.gov, DHS Summary Data for fiscal year 2006 and 
2007. Available at http://www.usaspending.gov/fpds/
fpds.php?sortby=u&maj_agency_cat=70&detail=-
1&datype=T&reptype=r&database=fpds&fiscal_year=2006&submit=GO and 
http://www.usaspending.gov/fpds/
fpds.php?sortby=u&maj_agency_cat=70&detail=-
1&datype=T&reptype=r&database=fpds&fiscal_year=2007&submit=GO.
    \24\ Available at http://www.usaspending.gov/fpds/
fpds.php?sortby=u&maj_agency_cat=70&detail=091&datype=T&reptype=r&databa
se=fpds&fiscal_year=2008&submit=GO.
---------------------------------------------------------------------------
   Approximately 42 percent ($6.6 billion) of DHS contract 
        dollars were awarded in fixed-price contracts in fiscal year 
        2006 \25\--a sharp decrease from the approximately 65 percent 
        ($6.8 billion) awarded in fixed-price contracts in fiscal year 
        2005.\26\
---------------------------------------------------------------------------
    \25\ FPDS-NG, ``Federal Procurement Report fiscal year 2006,'' p. 
89 of 201. Available at http://www.fpdsng.com/downloads/FPR_Reports/
2006_fpr_section_III_agency_views.pdf.
    \26\ FPDS-NG, ``Federal Procurement Report fiscal year 2005,'' p. 
89 of 205. Available at http://www.fpdsng.com/downloads/FPR_Reports/
2005_fpr_section_III_agency_views.pdf.
---------------------------------------------------------------------------
   Commercial item acquisitions accounted for $354 million in 
        fiscal year 2006 \27\ a decrease from the $467 million in 
        commercial item acquisitions in 2005.\28\
---------------------------------------------------------------------------
    \27\ FPDS-NG, ``Federal Procurement Report fiscal year 2006,'' p. 
90 of 201. Available at http://www.fpdsng.com/downloads/FPR_Reports/
2006_fpr_section_III_agency_views.pdf.
    \28\ FPDS-NG, ``Federal Procurement Report fiscal year 2005,'' p. 
90 of 205. Available at http://www.fpdsng.com/downloads/FPR_Reports/
2005_fpr_section_III_agency_views.pdf.
---------------------------------------------------------------------------
   Performance-based service acquisitions, contracts that focus 
        on outcomes rather than prescriptive requirements, accounted 
        for nearly $1.8 billion in fiscal year 2006 \29\ an increase 
        from $1.46 billion in 2005.\30\
---------------------------------------------------------------------------
    \29\ FPDS-NG, ``Federal Procurement Report fiscal year 2006,'' p. 
90 of 201. Available at http://www.fpdsng.com/downloads/FPR_Reports/
2006_fpr_section_III_agency_views.pdf.
    \30\ FPDS-NG, ``Federal Procurement Report fiscal year 2005,'' p. 
90 of 205. Available at http://www.fpdsng.com/downloads/FPR_Reports/
2005_fpr_section_III_agency_views.pdf.
---------------------------------------------------------------------------
   DHS awarded 31.6 percent of its contract dollars to small 
        businesses exceeding the general 23 percent small business 
        goal.\31\
---------------------------------------------------------------------------
    \31\ FPDS-NG, ``Small Business Goaling Report fiscal year 2006.'' 
As of July 1, 2007. Available at http://www.fpdsng.com/downloads/
top_requests/FPDSNG_SB_Goaling_FY_2006.pdf. According to the FPDS-NG 
web site, the ``Small Business Goaling Report Fiscal Year 2007'' will 
be available soon.
---------------------------------------------------------------------------
    As the above information shows, DHS is doing some things well. For 
instance, DHS's use of risky contract vehicles (sole source and 
commercial item acquisitions) decreased in fiscal year 2006 and the 
agency meet its small business contracting goal. DHS, however, 
decreased its use of fixed-price contracts and is doing more 
performance-based contracting, which have been problematic and expose 
taxpayers to risk.\32\ That stated, POGO has a number of additional 
concerns about the state of DHS contracting and some hidden costs to 
the agency and taxpayers.
---------------------------------------------------------------------------
    \32\ GAO Report (GAO-08-263), ``Department of Homeland Security: 
Better Planning and Assessment Needed to Improve Outcomes for Complex 
Service Acquisitions,'' April 2008. Available at http://www.gao.gov/
new.items/d08263.pdf.
---------------------------------------------------------------------------
                           DHS RESPONSIBILITY

    DHS's mission is to prevent terrorist attacks in the United States, 
reduce America's vulnerability to terrorism, and minimize damage from 
terrorism and natural disasters. To fulfill this mission, DHS has a 
vast organizational mandate that ranges from protecting the President 
(U.S. Secret Service), to protecting our oceans (U.S. Coast Guard), to 
protecting our borders (Customs & Border Protection and Immigration & 
Customs Enforcement), to protecting our airports (Transportation 
Security Administration), and to helping every town, city, county, and 
State in relief, recovery, and reconstruction efforts (Federal 
Emergency Management Agency). As a result, DHS has to be on the cutting 
edge of innovation, technology, and services to stay at least one step 
ahead of threats to our Nation. Yet, it still must protect the U.S. 
taxpayers.
    It is difficult to tell if DHS is meeting is contracting goals--
especially considering the emergency contracting environment in which 
the agency often works. Last year, however, the House Homeland Security 
Committee released a reported on ``The State of Homeland Security,'' 
which rated DHS in light of how it performed on seventeen homeland 
security issue areas.\33\ POGO was disappointed to learn that no DHS 
component received a grade higher than a ``B,'' and that four 
components received a ``C-'' or lower. The two functions at the heart 
of today's hearing--``Emergency Preparedness/FEMA'' and 
``Procurement''--each received a ``C-.'' The fact that DHS received a 
C- is indicative of the broader problems that DHS is experiencing in 
contracting and that it must become more responsible when spending 
taxpayer dollars.
---------------------------------------------------------------------------
    \33\ U.S. House of Representatives Committee on Homeland Security, 
``The State of Homeland Security: The 2007 Annual Report Card on the 
Department of Homeland Security,'' April 13, 2007, p. 5. Hereinafter 
``DHS Report Card.'' Available at http://homeland.house.gov/
SiteDocuments/20070413143439-12273.pdf.
---------------------------------------------------------------------------
    While the committee's report card stated that DHS succeeded in 
awarding some contracts, it also found for the most part that the 
agency failed in three key procurement measures--``cost, performance/
meeting requirements, and schedule. Unfortunately, the Department's 
[DHS's] track record in all three is poor.''\34\ The committee further 
stated that ``oversight and management of basic procurement processes 
[have] been weak.''\35\ The report highlighted procurement missteps in 
the Deepwater program,\36\ the Integrated Surveillance Intelligence 
System (ISIS), and eMerge2. Those contracting missteps compound the 
many mistakes made prior to and after Hurricane Katrina--some of the 
same contracting problems that occurred in the ``aftermath of Hurricane 
Andrew in 1992, which leveled much of South Florida.''\37\
---------------------------------------------------------------------------
    \34\ DHS Report Card, at p. 66.
    \35\ Id.
    \36\ POGO applauds the Coast Guard's decision to take over the role 
of lead systems integrator for the $24 billion Deepwater acquisition 
program. That shift in management and control of the program should 
enhance oversight of and accountability in the Deepwater program.
    \37\ GAO Report (GAO-06-442T), ``Hurricane Katrina: GAO's 
Preliminary Observations Regarding Preparedness, Response, and 
Recovery,'' March 8, 2006, p. 2. Available at http://www.gao.gov/
new.items/d06442t.pdf.
---------------------------------------------------------------------------
    The committee's findings are confirmed by more recent examples of 
waste, fraud, abuse, and mismanagement in DHS contracting.
   Last week, a news report surfaced about a DHS IG finding 
        millions of dollars wasted on sole-source Hurricane Katrina 
        contracts.\38\ The IG report states that the total of wasted 
        dollars could be at least $1 billion.
---------------------------------------------------------------------------
    \38\ Hope Yen, Associated Press, ``Audit: FEMA wasted millions on 
no-bid contracts,'' September 10, 2008. Available at http://
www.govexec.com/story_page.cfm?filepath=/dailyfed/0908/091008ap2.htm.
---------------------------------------------------------------------------
   After the Government Accountability Office (GAO) detailed 
        problems with advanced spectroscopic portal monitors 
        (ASPs),\39\ devices thought to detect radiation and identify 
        radiological materials, the Washington Post last week reported 
        that the program will be scaled back with cost much higher than 
        originally estimated.\40\
---------------------------------------------------------------------------
    \39\ GAO Report (GAO-07-581T), ``Combating Nuclear Smuggling: DHS's 
Decision to Procure and Deploy the Next Generation of Radiation 
Detection Equipment Is Not Supported by Its Cost-Benefit Analysis,'' 
Statement of Gene Aloise, Director Natural Resources and Environment, 
March 14, 2007. Available at http://www.gao.gov/new.items/d07581t.pdf. 
GAO Report (GAO-07-133R), ``Combating Nuclear Smuggling: DHS's Cost-
Benefit Analysis to Support the Purchase of New Radiation Detection 
Portal Monitors Was Not Based on Available Performance Data and Did Not 
Fully Evaluate All the Monitors' Costs and Benefits,'' October 17, 
2006. Available at http://www.gao.gov/new.items/d07133r.pdf.
    \40\ Robert O'Harrow Jr., Washington Post, ``Radiation Detector 
Plan Falls Short, Audit Shows Concerns About Cost and Effectiveness 
Could Curtail Program,'' September 4, 2008, D01. Available at http://
www.washingtonpost.com/wp-dyn/content/article/2008/09/03/
AR2008090303326_pf.htm.
---------------------------------------------------------------------------
   GAO recently found that SBInet, a ``multiyear, multibillion-
        dollar program to secure the nation's borders through, among 
        other things, new technology, increased staffing, and new 
        fencing and barriers,'' is in an uncertain state.\41\ The GAO 
        stated that ``important aspects of SBInet remain ambiguous and 
        in a continued state of flux, making it unclear and uncertain 
        what technology capabilities will be delivered and when, where, 
        and how they will be delivered.'' Additionally, ``requirements 
        have not been effectively defined and managed'' and management 
        has not been effective.\42\
---------------------------------------------------------------------------
    \41\ GAO Testimony (GAO-08-1148T) Before the Committee on Homeland 
Security, House of Representatives, ``Secure Border Initiative DHS 
Needs to Address Significant Risks in Delivering Key Technology 
Investment,'' Statement of Randolph C. Hite, Director Information 
Technology Architecture and System Issues Wednesday, September 10, 
2008. Available at http://homeland.house.gov/SiteDocuments/
20080910100952-17753.pdf.
    \42\ Id., at p. 2.
---------------------------------------------------------------------------
    These three examples highlight the cost of mismanagement. The risks 
and vulnerabilities associated with poor contract planning, inadequate 
management, and deficient oversight cost taxpayers money. Although many 
Government officials placed a lot of the blame on acquisition work 
force shortages, more investigations and audits of DHS's overall 
contracting system should be forthcoming in an effort to better protect 
the best interests of both DHS and taxpayers.
    While DHS is struggling with its contracting procedures, its 
contractors are lining up to learn the tricks to receiving more 
contract dollars. Fedmarket.com held a seminar on May 26, 2006, with 
topics including: ``The advantages and disadvantages of selling to 
DHS,'' ``Ways to keep your investment in the DHS market reasonable and 
your sales costs down,'' ``Locating DHS sales opportunities,'' 
``Identifying DHS procurement decisions makers,'' and ``Simplified 
Acquisition Procedures.''\43\ Although this is common in and around the 
Beltway, it emphasizes the fact that contractors are jumping at the 
opportunity to learn how to maximize some, if not all, of the agency's 
contracting vulnerabilities.
---------------------------------------------------------------------------
    \43\ Fedmarket.com, ``Selling to the Department of Homeland 
Security Seminar,'' May 26, 2006. Available at http://
www.fedmarket.com/seminars/DHS.shtm..
---------------------------------------------------------------------------
    Although many Members of Congress, media outlets, and public 
interest groups point fingers at the contractors, the problem is much 
deeper. DHS is in a vulnerable position: the agency has poor contract 
management policies and procedures, it is buying infant technologies, 
and buying under emergency circumstances when competition is, by 
necessity, limited or non-existent. As a result, DHS is frequently 
placed in a position mirroring the Department of Defense in the 1980's. 
In order to avoid the pitfalls that we have seen through history, 
Congress and DHS must place a greater emphasis on full and open 
competition, market research, contractor data, pre-award decisions, and 
on post-award monitoring and administration. These criteria will help 
establish integrity in DHS's buying system.

                   AWARDS TO RESPONSIBLE CONTRACTORS

    DHS must improve its ability to weed out risky contractors. 
Government contracts are predicated on a basic principle taxpayer 
dollars should be awarded to responsible companies. FAR Subpart 9.103 
states that ``[p]urchases shall be made from, and contracts shall be 
awarded to, responsible prospective contractors only'' and that ``[i]n 
the absence of information clearly indicating that the prospective 
contractor is responsible, the contracting officer shall make a 
determination of nonresponsibility.''\44\
---------------------------------------------------------------------------
    \44\ Available at http://www.arnet.gov/far/current/htm/
Subpart%209_1.htm#wp1084058.
---------------------------------------------------------------------------
    As POGO has been urging Congress for years,\45\ the Government 
needs a contractor responsibility database to ensure that taxpayer 
dollars are not at risk.\46\ Questions should be raised within DHS, and 
the Government in general, when contracts are awarded to risky 
contractors. These include contractors that have defrauded the 
Government or violated laws or regulations, contractors that had poor 
work performance during a contract, or contractors that had their 
contracts terminated for default. Continuing to award contracts to such 
contractors undermines the public's confidence in the fair-play process 
and exacerbates distrust in our Government. It also results in bad 
deals for DHS and taxpayers.
---------------------------------------------------------------------------
    \45\ POGO published a Federal Contractor Misconduct Database (FCMD) 
in 2002 and updated it in 2007. Available at http://
www.contractormisconduct.org/. A new and improved version of that 
database, including misconduct involving the Top 100 Federal 
contractors will be released in fall 2008.
    \46\ FAR Subpart 9.104-1 (``General standards'') outlines 
insignificant responsibility regulations. Available at http://
www.arnet.gov/far/current/htm/Subpart%209_1.htm#wp1084075.
---------------------------------------------------------------------------
    In an effort to prevent contracting with the ``usual suspects'' 
that have long rap sheets of misconduct, DHS should look for 
responsible vendors during its planning and contingency contracting 
phase. Some of the largest contractors hired to respond to the 
hurricanes in 2005 have checkered histories of misconduct dating back 
13 years: CH2M Hill (5 instances); Bechtel (12 instances); Halliburton/
KBR (20 instances); and Fluor (22 instances). Instances of misconduct 
include: false claims against the Government, violations of the Anti-
Kickback Act, fraud, conspiracy to launder money, retaliation against 
workers' complaints, and environmental violations.\47\ DHS is shirking 
its responsibility to vet contractors and determine whether they are 
truly responsible. POGO is concerned that pre-award contractor 
responsibility determinations have fallen to the wayside. DHS and other 
Federal agencies seem more concerned with awarding contracts quickly 
rather than ensuring the Government gets the best goods or services at 
the best practical price.
---------------------------------------------------------------------------
    \47\ POGO's FCMD at http://www.contractormisconduct.org/.
---------------------------------------------------------------------------
    Another problem that faces DHS is the under-utilization of the 
suspension and debarment system as a tool to weed out risky 
contractors. To be fair, the problem is not limited to DHS all Federal 
agencies under-use suspension and debarment against large contractors 
that supply the majority of the $465 billion worth of goods and 
services to the Federal Government each year. Overall, the Government 
needs to reemphasize the importance of preventing risky contractors 
from receiving future taxpayer dollars.

                           THE REVOLVING DOOR

    Another issue of concern is the aging work force and the potential 
for conflicts of interest in the small homeland security contracting 
world. According to the GAO, 15 percent of DHS's work force is greater 
than 55 years old and 20 percent of the work force is eligible for 
retirement by fiscal year 2012.\48\ There is a high likelihood that we 
will see many public servants leave the Government in the coming 
months, and accept jobs with DHS contractors.
---------------------------------------------------------------------------
    \48\ GAO Report (GAO-08-630T), Testimony Before the Senate Special 
Committee on Aging, ``Older Workers, Federal Agencies Face Challenges, 
but Have Opportunities to Hire and Retain Experienced Employees,'' 
Statement of Barbara D. Bovbjerg, Director, Education, Workforce, and 
Income Security Issues and Robert N. Goldenkoff, Director, Strategic 
Issues, April 30, 2008, pp. 7-8. Available at http://www.gao.gov/
new.items/d08630t.pdf.
---------------------------------------------------------------------------
    POGO has coined the term the ``politics of contracting,''\49\ and 
we have learned about many instances of questionable employee movement 
from DHS to the private sector and vice-versa. Examples include 
Government employees going to work for a sole-source contract awardee 
and another Government employee who is allegedly overseeing his former 
company. POGO urges Congress to regulate the transition through the 
revolving door and many of the ethical hurdles that it presents. DHS 
should also increase transparency regarding movement between the public 
and private sectors, and increase oversight and enforcement of 
regulated behavior.
---------------------------------------------------------------------------
    \49\ POGO Investigative Report--``The Politics of Contracting.'' 
The report details the revolving door between the Government and large 
private contractors where conflict of interest is the rule, not the 
exception. It also highlights specific revolving door cases and sheds 
light on the flawed system that allows them. June 29, 2004. Available 
at http://www.pogo.org/p/contracts/c/co-040101-contractor.htm.
---------------------------------------------------------------------------
                         OUTSOURCING GOVERNMENT

    Evidenced by the Coast Guard's Deepwater program failures, DHS 
should be looking at the jobs, functions, and positions that are 
outsourced to service contractors. POGO is not sold on the sales pitch 
that contractor employees are more effective and cost less as many 
proponents of outsourcing claim. DHS should be conducting personnel 
audits to determine if outsourcing went too far. Deepwater set a high-
water mark in showing what happens when a Government agency turns over 
virtually all management functions to the private sector a program 
behind schedule, over budget, and not meeting performance expectations.
    Outsourcing also raises personal and organizational conflicts of 
interest issues. The GAO studied the problem and found:

``Decisions to contract for professional and management support 
services were driven by the need for staff and expertise to get 
programs and operations up and running. However, for the nine cases we 
reviewed, program officials did not assess the risk that government 
decisions may be influenced by, rather than independent from, 
contractor judgments.''\50\
---------------------------------------------------------------------------
    \50\ GAO Report (GAO-07-990), ``Department of Homeland Security: 
Improved Assessment and Oversight Needed to Manage Risk of Contracting 
for Selected Services,'' September 2007, p. 3. Available at http://
www.gao.gov/new.items/d07990.pdf.

Many other Federal agencies are looking at this important issue and are 
not outsourcing work that should be performed by public servants. DHS 
must ensure that is isn't losing control over its mission and 
accountability of its management.

                            RECOMMENDATIONS

    Acquisition reform and the changed contracting landscape have 
placed taxpayer dollars at risk. POGO has witnessed the weakening or 
bypassing of taxpayer protections, and the unraveling of free market 
forces that protect Government agencies. For years, IG and GAO reports 
have exposed specific contracting missteps in individual cases of 
waste, fraud, and abuse. But the findings and recommendations from the 
individual cases are applicable to the larger systemic problems with 
DHS's, and the rest of the Federal Government's, contracting laws and 
regulations. I am not certain that anyone can provide the actual cost 
of DHS contracting missteps, and therefore more needs to be done to 
identify contracting waste, fraud, and abuse, as well as prevent those 
errors from reoccurring in the future.
    POGO has highlighted the following Government-wide contracting 
problems, which we hope will be considered by the committee:
    1. Cozy Negotiations.--To make every effort to get the best value 
        for the taxpayer, the Government must promote aggressive arm's-
        length negotiations with contractors.
    2. Inadequate Competition.--To better evaluate goods and services 
        and get the best value, the Government must encourage genuine 
        competition so that it can correct the trend of entering into 
        non-competitive contracts in 40 percent of Federal purchases.
    3. Lack of Accountability.--To ensure that taxpayer dollars are 
        being spent responsibly, the Government must regularly monitor 
        and audit contracts after they are awarded.
    4. Lack of Transparency.--To regain public faith in the contracting 
        system, the Government must ensure that the contracting process 
        is open to the public, including contractor data and 
        contracting officers' decisions and justifications.
    5. Risky Contracting Vehicles.--To prevent abuse, the Government 
        must ensure that risky contract types that have been abused in 
        the past (including performance-based contracts, interagency 
        contracts, ``task and delivery orders,'' also known as 
        Indefinite Delivery/Indefinite Quantity (ID/IQ) contracts, 
        under multiple award and Government-wide acquisition contracts 
        (GWACs), time & material contracts, purchase card transactions, 
        commercial item purchases, and other transaction authority) are 
        only used in limited circumstances and are accompanied by audit 
        and oversight controls.
    Specifically, POGO respectfully requests that this committee 
consider the following recommendations to improve DHS contracting:
    1. Ensure that full and open competition is the rule and restore 
        the definition of ``competitive bidding'' to require at least 
        two bidders.
    2. Require that risky contract vehicles are used in limited 
        circumstances and only when supported by proper justifications 
        and oversight protections.
    3. Review DHS commercial item and service acquisitions to ensure 
        that a commercial marketplace exists.
    4. Examine the use of ID/IQ and GWAC contracts to ensure that 
        contractors are not receiving improper fees.
    5. Investigate how prime contractors bill the Government at their 
        own labor rate(s) rather than the rate that they pay their 
        subcontractors on Time and Material or Labor Hour (T&M/LH) 
        contracts.
    6. Confirm that contractors are not performing inherently 
        governmental functions, which must be performed by civil 
        servants.
    7. Reestablish the taxpayer-protection checks and balances that 
        have been removed from the contracting system.
    8. Review DHS's use of the suspension and debarment system, 
        especially as it has been applied to large contractors with 
        repeated histories of misconduct.
    9. Provide a fair playing field for all DHS contractors by 
        requiring public posting of all task and delivery order 
        opportunities on FedBizOpps web site, and require copies of 
        contracts and task and delivery orders awards be made public on 
        USAspending.gov.
    10. Examine and improve the conflict of interest and ethics system 
        to ensure that DHS employees comply with all Federal conflict 
        of interest laws and regulations.
    Thank you for inviting me to testify today. I look forward to 
working with Chairman Carney and Ranking Member Rogers, and the entire 
subcommittee to further explore how the Department of Homeland Security 
can reduce contracting missteps that cost taxpayers.

    Mr. Carney. Thank you, Mr. Amey.
    Mr. Pearl.

   STATEMENT OF MARC A. PEARL, PRESIDENT AND CHIEF EXECUTIVE 
    OFFICER, HOMELAND SECURITY AND DEFENSE BUSINESS COUNCIL

    Mr. Pearl. Chairman Carney, Ranking Member Rogers, I thank 
you for the opportunity to appear before you this afternoon and 
in my capacity--sorry--in my capacity as the President and CEO 
of the Homeland Security and Defense Business Council, which 
is, as I think you know, a nonpartisan, nonprofit organization 
of the leading small, medium and large companies that provide 
the product, services and technologies for every program that 
encompasses our Nation's Homeland Security mission it is our 
job to in essence work this Congress and with the Department to 
try to achieve its mission.
    Our members employ hundreds of thousands of Americans in 
all 50 States. We are honored and proud to work alongside 
leaders from civilian and defense agencies in support of their 
strategic initiatives. The initial process of quickly creating 
the Department of Homeland Security and protecting our Nation 
required real-time immediate solutions and to hire reliance on 
outsourcing. It resulted in a contracting and procurement 
environment that is in many ways uniquely complex and 
challenging. A key issue for this committee and the Department 
is whether the lessons that have been learned from prior 
mistakes, burdensome procedures and unintended consequences 
will be incorporated into future projects. We must learn from 
our past mistakes and not be defined by them. The private 
sector plays a critical role in the special coordinated and 
collaborative Homeland Security security mission. Our members 
will not win future contracts if they do not deliver the 
products and services and provide world class experts and 
practitioners to the projects as needed. It is imperative that 
the foundation upon which a successful Federal procurement 
system is built be underpinned by credibility, by trust and 
confidence.
    In the post-9/11 world, Government has no choice but to be 
as agile and flexible as those who seek to cause us harm, the 
challenge is to find a balance between the need to strengthen 
oversight, including applying aggressive controls and 
transparency and the need to maintain flexibility to adjust to 
rapidly changing conditions on the ground to ensure a 
successful mission. Contracts that contain overly burdensome 
procedural requirements, a prolonged budget process, multiple 
decision-making layers, long reporting chain, overlapping 
management and operations, narrow work restrictions and 
insufficiently trained managers present challenges and impede 
success at a time when today's Homeland Security needs demand 
flexibility and adaptability.
    The emphasis should be on the desired result, not merely 
the process. The plan is a means. The mission is the end. The 
Council supports the May 2008 statement of the bipartisan group 
of House and Senate Homeland Security leaders that included 
Chairman Thompson that called for more explicit requirements 
and performance standards in major contracts to ensure 
successful outcomes. We support a process that mirrors the new 
environment and was reiterated by Mr. Gunderson discussed on 
the first panel. Quality contracting, quality acquisition 
management and quality people.
    The new administration whoever leads it, working with a new 
Congress, will have the opportunity to further build on 
procurement reforms with sound program management, client side 
support and improvement of the acquisition work force by 
focusing on the recruiting, training and retention of more 
talented contracting officials. The Council cannot emphasize 
enough the need to increase the number of procurement officers 
with expertise in technology, engineering and management to 
accomplish the complex aspirational aspects of oversight and 
review. The efforts of the Department's chief procurement 
officer should be commended and supported. But I think as even 
was said during the first panel, more needs to get done.
    A new generation of public sector managers must be 
recruited who are both disciplined and agile enough to work 
expertly in Government and more closely with their industry 
partners. Before an initial blueprint is drawn up, experts on 
the ground and practitioners in the field need to be brought 
into the process. The entire team must be equipped with an 
understanding of the challenges and the risks in place during 
the entire life cycle of the program to ensure success. It is 
also crucial to go beyond the Beltway, to assemble teams, to 
solicit input from those who are operational expert, those who 
best understand the needs and issues and in the end must 
implement the program to a successful conclusion are essential 
to the process. The contracting process requires establishing 
clear lines of accountability. We support that in the private 
sector. Large scale programs maybe complex, but the lines of 
responsibility must be clear. Once the mission and the goals of 
the program are known, the challenge is to keep the program on 
track and most importantly keep the best people on the program 
as you yourself, Mr. Chairman, mentioned earlier. Our goals 
should be to find the most appropriate, effective and efficient 
routes to overcome these challenges quickly and with the least 
disruption to the mission.
    In conclusion, the GAO report cited by the House and Senate 
leadership from earlier this spring found that ``contracts with 
well-defined requirements linked to measurable performance 
standards delivered results within budget and provided quality 
service.'' This approach will ensure the success that this 
committee, the next administration, the Department, the private 
sector and most importantly the American people demand and 
deserve in order to keep our Nation safer and more secure. 
Thank you, I will be happy to answer any questions you may 
have.
    Mr. Carney. Thank you, Mr. Pearl.
    [The statement of Mr. Pearl follows:]

                  Prepared Statement of Marc A. Pearl
                           September 17, 2008

                              INTRODUCTION

    Chairman Carney, Ranking Member Rogers and Members of the 
committee, I thank you for giving the Homeland Security & Defense 
Business Council an opportunity to appear before you today. We want to 
express our appreciation to this subcommittee and to the full Homeland 
Security Committee for its continued leadership on the full range of 
critical issues associated with Government management and procurement, 
and, in particular, its leadership on initiatives to enhance the 
partnership between the Government and the private sector when it comes 
to fulfilling our collective mission to keep our Nation safer and more 
secure. That partnership is essential to our Government's ability to 
deliver high quality services to citizens quickly and efficiently.
    I am Marc Pearl, President and CEO of the Homeland Security & 
Defense Business Council, a non-partisan, non-profit association of the 
leading small, medium and large companies focused on the homeland 
security market. Our members are responsible for the operational 
component of a contract--providing the products, services and 
technologies for every program that encompasses the homeland security 
mission for our Nation. The Council's members employ hundreds of 
thousands of Americans in all 50 States. We are honored and proud to be 
working alongside leaders from civilian and defense agencies supporting 
their strategic initiatives through our individual and collective 
expertise in technology, facility and networks design and construction, 
human capital, financial management, technology integration, and 
program management. I will be discussing lessons learned, best 
practices and recommendations for moving forward, and how the Council 
can serve as a resource to this committee and the Department.
    At the outset it is important to reiterate what many have said 
today and in previous hearings--that while the challenges of the 
contracting and procurement environment are complex, we must work 
toward finding practical solutions to these challenges. The Congress, 
the Department, and, indeed, our Nation is facing a transition to a new 
administration that will lead the Department forward. We hope that this 
committee will work proactively to provide helpful guidance to shape 
the relationships, the standards and the overall process of contracting 
and procurement. We also hope the committee will work with the 
Department in the evaluation of both perceived, failed, and successful 
partnerships with contractors; and provide a forum in which useful 
recommendations can be shared that will benefit all of the 
stakeholders.
    The Council supports the ``quality-control'' of congressional 
oversight and values your role in encouraging and prodding, if/when 
necessary to achieve these goals. It is our responsibility to develop 
with this Congress, and the Department, a functional, practical, 
effective process by which--when the decision is made to outsource a 
project--to know the specifics, adhere to oversight, and develop a 
management-contractor relationship that is based on realistic goals and 
expectations in order to achieve the most successful outcome for all 
the stakeholders. There are linkages between each phase of a large and 
complex program, and a third party providing advice and counsel is one 
critical link that ensures success and is often impossible to achieve 
if it missing.
    We believe that the goal of establishing a ``culture of 
preparedness'' that serves to prevent, detect, protect, respond and 
recover in the event of a catastrophic emergency--whether by a 
terrorist or natural disaster as we have witnessed many times in the 
past few weeks alone--is best achieved when the stakeholders work 
together in a vibrant partnership. This partnership then provides our 
Government with the ability to access the best solutions and 
capabilities to achieve mission success--a safer and more secure 
Nation.

                            LESSONS LEARNED

    Building a national security apparatus from scratch is one of the 
most formidable bureaucratic feats imaginable. The Department was given 
a very large, complex and important mission, and early on was short of 
adequate resources. The initial process of creating the Department and 
attempting to identify and meet the needs of our Nation quickly meant 
that there would be more outsourcing than usual. Private contractors 
have been instrumental in supporting and in providing the substantive 
and procedural expertise to achieve our collective mission.
    The Department of Homeland Security has been working feverously 
since its creation and continues to demonstrate its commitment to keep 
up with these forces for change. While we have seen many incremental 
successes even the leadership at DHS admits that much work remains to 
be done. For example, after 5 years, many of our members remain 
frustrated in some of their relationships, or even in attempting basic 
business dealings with DHS. DHS officials have told us that they 
recognize that there have been missed opportunities, burdensome 
procedures and complex challenges. We are also cognizant of the fact 
that a process of focusing on and promoting policies and programs that 
encourage the private sector to continue to invest in homeland security 
is taking shape, slowly but surely. It would be extremely detrimental 
to our Nation for the private sector to walk away. That would only lead 
to failure for both DHS and our Nation.
    The private sector simply wishes that the Government articulate its 
objectives and requirements in a clear and/or concise fashion. 
Articulating goals at the outset of any contract, and then having the 
terms and conditions flow from it, is the bedrock of good project 
management. It is inherently unfair and discouraging to companies that 
seek to provide their expertise and technologies in ways that could 
help the Nation when there is no coherent foundation to begin with. If 
a procurement contract is vague in its requirements, the chance of 
failure increases, and everyone loses.
    The key issue is whether lessons that have been learned from prior 
mistakes, burdensome procedures and unintended consequences will be 
incorporated into future contracting. After each contract experience 
our members learn and adapt their business procedures accordingly. Each 
of us wants the best possible outcome, but achieving it requires a team 
effort for successful project and program delivery on schedule and at, 
or below, cost.
    This is the time and a perfect opportunity to step forward--
recognizing the many positive achievements, evaluating why they were 
successful, and using the time to provide a blueprint that the next 
administration and its DHS leaders can use to be even more successful. 
We must learn from our past mistakes and not be defined by them.

                     THE FEDERAL PROCUREMENT SYSTEM

    Mr. Chairman and Members of this committee, the Federal Government 
has the largest and most complex procurement system in the world by any 
measure, and the Department of Homeland Security is one of its largest 
components. Since public funds are involved, it is imperative that the 
foundation upon which a successful Federal procurement system is built 
must be underpinned by credibility, trust, and competence. As such, we 
share your commitment to ensuring that the Federal Government in 
general, and the Department of Homeland Security specifically, only do 
business with responsible, ethical parties. Every one of our members 
who enters into contracts with the Federal Government is fully aware 
that this is a privilege--not a right. Our members have just as much 
desire for positive outcomes as the Government wants them to have.
    We in the homeland security Federal contracting space recognize the 
important role we play in achieving the special mission our country 
took on 7 years ago last week. In fiscal year 2006, the Department of 
Homeland Security spent more than $15 billion on nearly 67,000 
individual contract transactions--$5 billion of which was spent on 
management and professional support services--awarded to almost 16,000 
contractors. It is also important to point out that, to its credit, 
more than $4.5 billion of the DHS prime-contracting dollars went to 
small business.
    It is notable that, even with its size and complexity, the Federal 
acquisition system actually works with and serves the public quite 
well. Clearly, it is also a system that faces many challenges and has 
areas where improvements are needed. Real fraud and abuse, while deeply 
troubling whenever uncovered, is actually relatively rare, and the 
Government has in place a wide array of generally effective statutes 
and standards that apply to entities seeking to do business with it.
    When there are mistakes, our members have a deep and abiding 
interest in seeking to correct them as much as, or more than, does the 
Government. Our members will not win future contracts based on poor 
performance; they will win contracts because they can deliver the 
products and services, and provide world-class experts and 
practitioners to the effort.
    The Federal procurement system is a complete life cycle--from 
requirements development to solicitation, award, performance and 
contract closeout. Each phase of the process is dependent on the other, 
and on multiple parallel processes. The Federal procurement rules are 
complex and provide many opportunities for honest mistakes. Intentional 
misconduct, however, is rare and should be fully prosecuted, but we 
realize that even these allegations undermined the trust and confidence 
in the performance of the acquisition process. There must be urgent 
attention paid to the Federal acquisition work force and to the 
relationships between agency mission needs and acquisition outcomes. 
Problems must be thoroughly and factually analyzed to ensure that root 
causes are properly identified and their effects on the Federal 
procurement life cycle understood.
    We all understand--as the title of this hearing indicates--that 
waste and mismanagement is a very serious issue. Taxpayers demand 
solutions. I am here today to be part of the solution.
   If lenient controls or processes exist--the contracting 
        industry wants to work with Government to tighten them.
   If there is a need for better oversight of the private 
        sector's work--the contracting industry will aggressively work 
        with the Government to ensure that occurs, as we believe we do 
        today.
   If there is a dearth of contracting expertise at DHS--the 
        contracting industry will partner with Government to address 
        the need for greater education and training.
    When properly outlined at its beginning, appropriately managed, and 
adequately overseen during its delivery, Federal contracts can, and 
most often do, generate desirable and substantial benefits for our 
Nation. If the contract is specific, has taken into account economic 
reasonability and technological feasibility, and effectively balances 
the substantial risk incurred by the performing contractor with 
appropriate rewards--everyone wins.
    The Council and its members have worked closely and successfully 
with the senior procurement executives at DHS to ensure that the system 
and the process work for all parties concerned. We are all passionately 
dedicated to the successful realization of the agency's mission.

  A NEW CENTURY, A DIFFERENT WORLD, A NEW ADMINISTRATION, A DIFFERENT 
                                OUTLOOK

    In the post-9/11 world, Government simply has no choice but to be 
agile and have systems in place that are as flexible as those who seek 
to cause harm. Government must also be instantly responsive to sudden 
events--be they man-made or natural--that disrupt our communities and 
the national economy.
    The challenges of this new environment are daunting. Whether it is 
helping to create a new agency that must seamlessly coordinate 
different cultures, secure over 100,000 miles of land surrounding our 
borders, ensure that every container entering our ports is safe, search 
every piece of luggage boarding an aircraft, we are all dependent on 
the rapid adoption and successful implementation of the most effective 
technologies and expert human capital to accomplish each new mission 
without significant interruption.
    In rising to this challenge, Government's historic approach to 
development of programs, implementation of project management, and 
oversight of the process are realistically being put to the test. 
Traditional hierarchical approaches are facing the speed, complexity, 
and diversity in today's economy and we need to have homeland security 
solutions in place as soon as possible. Long reporting chains, 
overlapping management and operations, narrow work restrictions, 
insufficiently trained managers, and compartmentalized operating units 
are no longer acceptable if we are to achieve the mission.
    Procurement time frames are unnecessarily lengthy, often making the 
best technologies obsolete and wasting human capital and resources 
between the time a Request For Proposals is issued and a purchasing 
decision is made. Detailed procedural requirements, prolonged budget 
processes, multiple decisionmaking layers, and detailed design 
directives impede success when today's homeland security needs demand 
flexibility and adaptability.
    This is by no means a challenge specific to Government alone. 
Neither the public nor private sectors are immune to change. Many 
organizations are revamping the old organizational charts of closed 
boxes sealed off into distinct columns. In their place, they are 
shaping a dynamic web in which participants connect and cooperate on an 
on-going, networked basis.

               QUALITY CONTROLS, PROCESSES AND RESOURCES

    The Council and its members support a process that mirrors this new 
environment and urges that the Department embrace these priorities as 
it moves forward in revitalizing its procurement process:
    1. Quality contracting;
    2. Quality acquisition management; and
    3. Quality people.
    The unique mission and newness of the Department requires a 
constructive dialog and expert input to build the internal agency 
infrastructure and make the changes essential to having a strong, 
effective contracting process.
    Many of your colleagues on both sides of the aisle and both sides 
of the Hill, the GAO, academics, and other outside organizations, have 
identified many of the elements necessary for a strong contracting 
process: a performance work statement, measurable performance 
standards, and a quality assurance plan.
    The Council supports the May 2008 statement of the bipartisan group 
of Senate Homeland Security & Government Affairs Committee Members 
that, together with Chairman Thompson, called for more explicit 
requirements and performance standards in major contracts to ensure 
successful outcomes.
    Successful missions need due diligence, specificity of terms and 
outcomes, and thoughtful expert oversight. The Council's members 
support making certain that the contractor knows specifically what is 
needed in order to achieve success. Additionally, we want and need 
processes in place that provide expert oversight officials with the 
least burdensome and highly dynamic ability to accurately measure 
performance.
    The challenge is to find a balance between the need to strengthen 
oversight, including applying aggressive controls and the need--
particularly as it relates to homeland security--to maintain 
flexibility to adjust to rapidly changing conditions on the ground and 
ensure a successful mission/project. Private industry welcomes expert 
contracting management and oversight officers. We do our best work when 
specific feedback is part of the process.
    A new administration working with a new Congress now has the 
opportunity to further improve on procurement with sound program 
management, client-side support, and the improvement of the acquisition 
work force by focusing on the recruiting and training of more talented 
contracting officials. There should be integrated project teams, led by 
the Government, but with operational involvement of contractors. We 
urge that the Department continue to develop acquisition work force 
tools to forecast needs and develop certification requirements.
    The largest contracting office within DHS, the Office of 
Procurement Operations, had three people on board in 2003. Today, there 
are 200. Without these individuals, DHS can't procure the goods and 
services they need to secure the homeland. It cannot, however, be just 
about numbers, but also the securing of contract specialists with the 
requisite skills--on-the-ground experts who understand the mission and 
objectives of the project at the beginning--so that there are as few 
``surprises'' as possible and a shared understanding as to timely 
delivery and specific and realistic expectations. A highly skilled work 
force that can conceptualize, monitor, and administer the highly 
complex programs and contracts will minimize failures.
    The Council cannot emphasize enough the need to increase the number 
of procurement officers with expertise in technology, engineering and 
management to accomplish the complex operational aspects of oversight 
and review. While we recognize that there is a shortage throughout the 
Government of expert contracting officers, the efforts of the Chief 
Procurement Officer at DHS should be commended and supported. For 
example, in addition to a number of other significant initiatives she 
has announced the establishment of an important Acquisition Intern 
Program that should strengthen the acquisition work force by 
attracting, hiring and training exceptional new talent, and developing 
a pipeline for future acquisition leaders.

              PARTNERSHIP, SKILLS AND A CULTURE OF CHANGE

    Nowhere is the need for a close partnership between the public and 
private sectors more evident than when our Nation needs to prepare, 
deter, and, if necessary, respond to catastrophic emergencies within 
our borders. The extraordinary efforts that our public servants and 
private sector leaders have engaged in since September 11, 2001, are 
evidence for necessary and mutually beneficial partnerships.
    We must, however, move even more rapidly toward responsible and 
appropriate ways of fostering greater cooperation, collaboration and 
communication.
    Government needs to seek out new approaches to work together with 
the private sector, with greater predictability and cost-effectiveness. 
When working with the private sector, it is best to introduce a 
partnership approach early on--and build on it. New restrictions on 
Government contracting won't make our borders safer--greater innovation 
will.
    Government must continue to build the internal skills necessary to 
match the capabilities sought from the private sector--including the 
capacity to manage complex relationships. It is important to invest in 
developing program, project, and procurement management capabilities 
within the civil service. The complex and unique nature of the projects 
essential to our homeland security require contracting officers who 
possess an adequate understanding and are given the resources to carry 
out their responsibilities with integrity and transparency.
    When there are large and complex contracts there inevitably will be 
issues--but they can't weaken long-standing relationships or the 
realization that we're all in this together. Government must take the 
lead in shaping a new kind of supplier partnership to ensure greater 
accountability--by aligning incentives, sharing risks, and measuring 
performance.
    For example, the Homeland Security & Defense Business Council, more 
than 3 years ago, offered DHS help with the challenge of increasing the 
number of certified project managers by offering to help fund a new 
certification program through the Project Management Institute. Our new 
relationship with Georgetown University's Public Policy Institute, 
which offers a certificate in Homeland Security Studies, will provide 
input and aid in developing the curriculum for the first generation of 
students who will be employed throughout the private and public 
sectors. These and other programs can help create a new generation of 
public sector managers that are both disciplined and agile enough to 
work expertly in Government, and closely with industry, to achieve a 
new level of performance.
    DHS needs not only the expertise but also the full cooperation of 
the private sector to succeed in homeland security. The private sector 
often has the capabilities and technologies that DHS needs to 
operationalize its mission. In other words, DHS establishes the 
priorities based on risk but they often don't have the inherent 
capabilities to make those programs successful--they must often rely on 
the private sector to develop the programs--including the technology--
and to make the programs work.

             THE PROCUREMENT PROCESS AS PART OF A LIFECYCLE

    The Council believes that the acquisition process is part of a 
lifecycle that must begin earlier than contracting activity itself. 
Before the ``blueprint'' is drawn, experts on the ground and 
practitioners in the field need to be assembled and questioned. A 
successful process also requires equipping the entire team with an 
understanding of the challenges and risks in place during the entire 
lifecycle of the project to ensure success. Quadrennials, which provide 
a strategic view of priorities/budgets, operational requirements, and 
programmatic alignments, guarantee cost efficiencies and mission 
achievement.
    This will provide an opportunity for Government to include the 
private sector in the Department's long-range priorities and long-term 
needs to improve understanding and direct R&D efforts. The Quadrennial 
also provides the private sector with an opportunity to educate the 
Government about gaps in technology or capabilities, and to set 
reasonable expectations about timeliness and cost of delivery.

THE CHANGING DYNAMICS OF THE ``NEW WORLD''--BEING FLEXIBLE AND PLANNING 
                           FOR CONTINGENCIES

    The culture of challenging assumptions of the past depends on 
flexibility and decentralization--not a rigid adherence to checking off 
boxes. We must recognize that priorities change and plans will 
sometimes require adjustment to account for changing circumstances. 
Given the importance of maintaining public support and achieving 
overall mission success, flexibility is a crucial element of any 
program--specifically the ability to deploy innovative technologies and 
human capital--sometimes more nimbly than the Government's existing 
work force and capital resources would permit.
    Similarly, it's important to plan for appropriate contingencies. 
It's rare that expected developments cause problems. Flexibility, 
however, must be coupled with a rigorous commitment to execution.
    This approach is not at all about cost savings, but rather about an 
effective response to our Nation's clarion call to have a system in 
place that can efficiently and effectively provide mechanisms to secure 
our homeland and respond to catastrophic incidents.
    The private sector and Government will always need to respond 
quickly to emerging threats, but to the extent that we can think in 
tandem and more strategically, it helps us in the private sector better 
serve the Government need by permitting discussions earlier in the 
process--away from the actual contracting activity--to allow robust 
exchange of ideas without compromising the integrity of the process.

               MOVING AWAY FROM BEING ``BELTWAY-CENTRIC''

    It is crucial to go ``beyond the Beltway'' to assemble teams and 
solicit input from those who are operational experts--those who best 
understand the needs and issues and in the end must implement the 
project/program to its successful conclusion. The Federal Government 
and the American people are entitled to access and consultation with 
the best professional talent and technology--both in the private and 
public sectors--that can be utilized to ensure success of mission.

                 EMPHASIZE THE RESULT--NOT THE PROCESS

    Perhaps as a consequence of its unique mandate and nature, the 
focus within Government too often tends to be on the process rather 
than the result. Missing the forest for the trees is an occupational 
hazard in both public and private sectors, but the impact in Government 
agencies can be especially debilitating. The plan is a means--the 
mission is the end.

                ESTABLISH CLEAR LINES OF ACCOUNTABILITY

    When responsibility for a project is parceled out in unconnected 
pieces, it is difficult to pin down who is accountable when 
expectations fall short. Large-scale programs may be complex, but the 
lines of responsibility must be clear. Rather than rely on process 
standardization, it is vital to introduce the principles that 
characterize the 21st century organization, including its dependence on 
partners to achieve its results.

                               CONCLUSION

    Rather than rehashing history, the Council would like to recommend 
the building of a path toward the future so we can move this process 
forward. We must learn from the past, not be defined by it.
    Once the mission and goals of a project are known, the focus needs 
to be on keeping the project on track and most importantly, to keep as 
many of the best people on the project as possible.
    The Council is offering to work with the committee as a neutral, 
but very interested actor, to be a conduit between the public and 
private sector to achieve these goals of reform--to identify and find 
real world solutions to contracting challenges and work toward better 
accountability, diversity in the homeland security community and, most 
importantly, to ensure a sound, fair, and responsible contracting 
process.
    Government and its partners share the same goal. We want to see 
projects completed on-time and on-target. We want to see programs that 
meet their objectives. We understand sometimes there are roadblocks. 
Our challenge is to find the most appropriate, effective, efficient 
routes to overcome them quickly and with the least disruption to the 
mission. We can do this by working together in meeting the goals of our 
common mission.
    The public and private sectors--working from previous 
recommendations and developing new ones if necessary--must be able to 
work from the same strategy. In the GAO Report cited by the House and 
Senate leadership from earlier this spring, it was found that 
``contracts with well-defined requirements linked to measurable 
performance standards delivered results within budget and provided 
quality service.''
    To be successful, this will include:
   Greater support for the recruitment, development, and 
        retention of a corps of modern managers skilled in the 
        complex--and essential--task of meeting the mission by building 
        links and reaching out beyond the public sector to whomever can 
        serve the interests of the Nation.
   The ability of public and private sector managers to be 
        equipped and able to speak out if there are newer technologies 
        or better solutions.
   A better and more specific planning throughout the lifecycle 
        of the project with more focused, proactive oversight.
    This approach will get our Nation where it needs to go--where this 
committee, the next administration, the Department, the private sector 
providers of services and technology want us to go--and will ensure 
that we get there together.
    As another GAO Report from April pointed out the Department has to 
undertake these critical missions while also working to transform 
itself into a fully functioning cabinet department--``a difficult 
undertaking for any organization and one that can take, at a minimum, 5 
to 7 years to complete even under less daunting circumstances.''
    In the face of a transition, and a strong desire of all the 
stakeholders to move forward in achieving of our common mission, this 
is certainly the time to evaluate, question and develop a foundation of 
support for the agency tasked with securing our homeland.
    On behalf of the Homeland Security & Defense Business Council, I 
appreciate the opportunity to provide our comments on the important 
issues before the subcommittee. The Council desires to provide this 
committee and DHS with the support, expertise, and input you need to 
ensure that sufficient resources are afforded and appropriate processes 
are in place to achieve success. We look forward to working with the 
subcommittee as it continues its deliberations.

    Mr. Carney. We will now begin the second round of 
questions. Each Member will have 5 minutes. I will begin with 
myself. Ms. Madsen, you mentioned that data--you didn't have 
data, that the data was not available. Was the data not up-to-
date while you were making your reports? What was the case?
    Ms. Madsen. Thank you. Are you referring to the competition 
data?
    Mr. Carney. Yes.
    Ms. Madsen. Okay. What we found--and I can tell you looking 
at data from FPDS changed my hair color during the course of 
the panel. What we found is that the Federal procurement data 
system, next generation simply, there was data available, the 
high level about competition, but not at a granular level. When 
you look at the amount of the Government's procurement spend 
and the percentage that went through interagency contracts 
through the ordering process that did not go off on contract 
awards but went off on order, there was no data available at 
all. I think that is probably still true.
    I don't think the system has yet picked up those orders 
that are placed under those multiple award--multiple agency 
contracts.
    Mr. Carney. Can you speculate as to why that is the case?
    Ms. Madsen. They didn't collect--I think they have now 
started to collect it. But the system was focused on capturing 
data about contract awards, not about data on orders under 
existing contracts?
    Mr. Carney. Okay. Now, I want to kind of talk about 
Deepwater for a moment if we might, Ms. Madsen. Even after we 
saw what happened with the project and these ships that were 
basically unfloodable was your point, the contractors were 
still given a $4.6 million bonus. Now, why would something like 
that happen? What is in the nature of a contract like that that 
would allow that to happen?
    Ms. Madsen. Mr. Chairman, I don't know any more about 
Deepwater than what I can read in the GAO reports and the IG 
reports.
    Mr. Carney. Well, there were certain incentives written 
into the contract that were not performance-based actually.
    Ms. Madsen. Sir, I don't really feel competent to answer 
that question specifically. I can, I think, say, based on our 
work and not with specific reference to Deepwater that we 
consistently found, that when you don't have a good definition 
by the buyer of its requirements and very firm performance 
criteria that it is very hard to measure what performance is. I 
would guess, and that is what I am doing, that they have got 
those kinds of issues here.
    Mr. Carney. Mr. Amey.
    Mr. Amey. Again, I haven't followed the Deepwater awards 
fees that well either. But one issue that you also have to 
consider is that we have heard from certain contracting 
officers in the past that a lot of times it is easier to award 
those bonuses than it is not to avoid any possible litigation 
or complaints from the contractor as well as poor performance 
in the future. So I don't know if that is--you know, in 
essence, that may even be a bribe in some people's minds. But 
it is an issue that you have to take into account that a lot of 
times with performance measures, with evaluations of 
performance, it is very difficult as Ms. Madsen says, but there 
is a possible--if it isn't well-defined, then it isn't easy to 
measure. Then at that point there are possible potential 
hurdles for the contracting officer and it could slow down the 
program if they were to award all the money. We have seen 
instances with that in Department of Defense programs.
    Mr. Carney. Do we see many conflicts of interest with 
contract procurers doing contracts for their parent 
organization?
    Mr. Amey. Not that I am aware of. I do have a few instances 
outside of Deepwater where there is some interesting conflict.
    Mr. Carney. I am sorry. Not specific to Deepwater, but 
outside the----
    Mr. Amey. Well, Deepwater, I think presented a natural 
conflict of interest too because you handed over so much 
authority over to the--you know, over to the lead systems 
integrators that at that point the Government, you know, was in 
a position where I don't even know if it could administer--
effectively oversee that contract. I think that is what we are 
seeing even now once it came back in house, that there were 
some questions raised on how soon the Government and DHS and 
the Coast Guard will get up to speed in being able to 
effectively monitor and oversee that contract.
    We have seen it in some other instances with DHS 
contractors where we have seen some people come in from the 
private sector that are overseeing, or are very involved with 
their former private sector employers and we have also seen 
some instances, specifically some with Katrina, where I have 
some outstanding FOIA requests with DHS in which I am trying to 
get down to the facts of very large no-bid contract that was 
awarded, and then within days, the person left and went to work 
for a contractor that received that award. From what I am 
hearing, there is a possibility that there is a criminal 
investigation that is taking place involving that instance. So 
there may be something more that comes out that you will read 
about in The Washington Post or that we would come to your 
committee with.
    Mr. Carney. I certainly hope that is the exception and not 
the rule. We will readdress this in the next round. Mr. Rogers 
for 5 minutes.
    Mr. Rogers. Thank you, Mr. Chairman. Mr. Amey, in your 
prepared remarks you made a point that nearly 40 percent of all 
contracts--of contract spending is awarded without competition 
and I would ask you first, and then the other two witnesses to 
tell me, why do you think so many of these are not being 
competed?
    Mr. Amey. It all boils down to your definition of 
competition. That number could be higher if you include the 20 
percent of one-bid contracts that Ms. Madsen referred to. But 
it boils down to, I think, DHS--their number, I think, was very 
high because of Hurricane Katrina. They were placed in a 
position where competition either had to be done away with or 
at least very limited. That was just poor planning. Again, that 
goes back to my comments about comparing GAO reports that were 
tied to Hurricane Andrew. I think the DHS and FEMA were stuck 
flat-footed. I don't think they were prepared. They should have 
contracts in line for car, for cell phones for--you know, all 
the different things that they needed. That was preplanning. 
They didn't have anything to do with an acquisition workforce 
issue. That was just bad planning I should say. Bad 
preplanning.
    But when you add in continuations of bid contract when you 
add in the fair opportunity for a lot of these multiple award 
contracts where they are considered competed on the front end 
but not on the back end. Ms. Madsen can go into that because I 
know that was one of her recommendations if her panel's report, 
was that we extend currently DOD has to bid multiple award 
contracts. But we don't have it for the civilian agencies. That 
may be something that the subcommittee wants to take a look at 
and to add a second layer of competition into the system.
    Mr. Rogers. Ms. Madsen. The question again was: Why do you 
not see more competition?
    Ms. Madsen. I actually think the picture is pretty complex 
based on the work that we did. I can't say that 40 percent is 
the right number. Government-wide the number that we were able 
to identify on contracts was about 36 -ercent in fiscal year 
2004. That did not account for the instances where only one 
offer was received. It did not account for task order awards 
under IDIQs. So the number is probably higher. I think there 
were some things in the mid-1990's to 2000 time period that 
probably--including the huge reductions in the workforce and 
the pressure to get things awarded that have resulted in this. 
These numbers based on what we could tell, were pretty 
consistent over the past 10-year period. I mean, so they are 
not for the Government they are not up, but I think our 
comparison, which was to what--what do large private sector 
buyers who are buying services, what do they get, their 
competition is a lot more rigorous. That is really what we were 
trying to compare to, is when you are looking at private sector 
buyers who are buying large IT heavy services which is mostly 
what the Government is buying these days, you know, what are 
they doing? And it just didn't measure up.
    Mr. Rogers. What about--Mr. Pearl, why?
    Mr. Pearl. In what context?
    Mr. Rogers. Why didn't it measure up? I mean, we are 
talking about your member companies. Why isn't there more 
competition among them to try to get these contracts?
    Mr. Pearl. Well, I think as I alluded to both in my written 
testimony and my oral, there is a sense in--at least in--and I 
am only speaking about the Department of Homeland Security--is 
that in the context--is that early on there is a sense of 
frustration because it was taking a long time to get a 
response. It was taking a long time to get--have your A team as 
the Chairman was talking about ready to go and that by the time 
in essence decisions were made, that A team might have been 
pulled for another project, another program. So that in 
essence, what I have heard from a number of our members is that 
early on there was a sense of frustration.
    Therefore, if I have already bid on this and it has taken 
so long, am I going to spend a huge amount of dollars in 
research and development to bid on another which might be just 
as good or better? But, in fact, they couldn't afford that. So 
frustration was an early stage. The whole nature of the 
immediate need, I think, in terms of being able to preplace the 
product, the service, the technology on the ground as quickly 
as possible in terms of meeting the mission of what was trying 
that this Congress and what the Department was trying to 
accomplish early on is also one of the reasons why I would not, 
with any data in front of me, suspect that there was, in fact, 
one bid or no bids on certain situations.
    What I don't know, and I think it is worthy of at least 
looking into over the course of in the months to come as we 
look forward as opposed to looking back, is whether there 
really is any correlation, however, with the title of this 
hearing. Whether, as a result of a one-bid or a no-bid 
contract, does that necessarily correlate to greater waste or 
abuse or mismanagement? I haven't heard that. I think that is 
an issue that the committee and the subcommittee is looking at.
    But there is not necessarily any correlation to the fact 
that a contract wasn't fulfilled to its ultimate end 
successfully or not, because there was one-bid or no-bid or a 
competitive bid situation.
    Mr. Rogers. I think as you heard from Ms. Madsen earlier, 
generally when you find there is a one-bid contract there is 
going to be an inflated cost to that contract. That has been my 
experience in the private sector, and I think all of us feel 
that is probably what is happening, although it may be an 
inaccurate feeling. My time is up. I yield back.
    Mr. Carney. Thank you, Mr. Rogers. The Chair recognizes the 
gentleman from New Jersey, Mr. Pascrell.
    Mr. Pascrell. Mr. Chairman, I want to confer and agree with 
the gentleman, my good friend from Alabama. I want to take it a 
step further. That is we have had one-bid contracts and no-bid 
contracts. I would like to know a yes or no answer from each of 
the participants in panel No. 2. Do you believe that a 
contractor should be utilized--we are talking about 
nonemergency situations--should be utilized when there is no-
bid or there is one-bid if that person--if that contractor has 
contributed to the Executive branch of Government, pay-to-play? 
I am from New Jersey. We are experts on that.
    Let me ask you the question, though. Do you think that that 
contractor should be able to called in to do that work if that 
contractor in a no-bid or one-bid situation has contributed to 
the Executive branch of Government? Yes or no.
    Ms. Madsen. What do you mean by ``contributed''?
    Mr. Pascrell. Contributed in a political campaign.
    Ms. Madsen. So not contributed a work product?
    Mr. Pascrell. No, no, no. I meant contributed to--you know, 
legally contributed to--we are talking legally here obviously. 
Legally to a Presidential candidate. What do you think there, 
Ms. Madsen?
    Ms. Madsen. I don't think the question is that simple 
unfortunately because I think almost every major player 
probably contributes. So--and there are legitimate reasons and 
there are statutory exceptions that permit----
    Mr. Pascrell. Remember, I said--I am not talking about an 
emergency.
    Ms. Madsen. I am going to tell you I can't answer that yes 
or no.
    Mr. Pascrell. Thank you. Mr. Amey.
    Mr. Amey. My answer is no, they shouldn't be able to get 
that award. It is actually one of the recommendations--we put 
out a report in 2004 called the politics of contracting and we 
looked at this issue. Specifically, one of the things that we 
said was we should roll back to the pre-1976 era when 
contractors weren't allowed to give money. The offshoot of that 
was the designation of PACs. So that is one of the things we 
have said is okay, contractor PAC, shouldn't be allowed to give 
money.
    Mr. Pascrell. Since your report came out in 2004, has there 
been an adherence to that report or have things gotten better 
or worse?
    Mr. Amey. I would say they have remained probably with the 
status quo. The report actually looked at lobbying 
expenditures, campaign contributions, individuals and PACs, as 
well as the revolving door.
    Mr. Pascrell. Mr. Pearl.
    Mr. Pearl. On its face, you are saying that the 
contribution to any political campaign, be it Congress or at 
the Executive level, is a legal contribution. My response 
should be--would be that that that is ostensibly in a 
transparent world, which we are calling for, where there is, in 
essence, across the board, total understanding of notice, 
across the board that that is a consideration in terms of the 
part of the process, I don't see any reason why, if it is legal 
to give a contribution, that they shouldn't be able to and 
compete fairly in the free market.
    Mr. Pascrell. Okay. Mr. Amey, I think we have seen time 
after time that the DHS contracts are yet another effort by the 
folks down the street to guarantee more work for private 
contractors with contracts that contain few specifics and 
suffer from lax oversight. If you look through all the reports, 
you know, that is pretty much a common strength role of those.
    This is a part of a larger pattern of behavior that 
believes that every private contractor should be given a free 
hand and be trusted implicitly not to choose their own profit 
margin over providing quality and cost-efficient products and 
services paid for by all of us, the taxpayer. This pattern was 
demonstrated time and time again, notably in the relative 
failure of Project 28 to work as advertised on the U.S./Mexican 
border, as well as numerous military contracts given to 
Halliburton, KBR in Iraq that were proven to be rife with 
fraud. I mean, we figured that out. Somebody else--a third 
party figured that out. I want to ask you this question: To 
what extent have you found that the Department of Homeland 
Security shifts its decisionmaking authority to these private 
contractors?
    Mr. Amey. We have most of our recommendations take a look 
at the agency just overall, and it is based on specific 
instances that come in. But it is based on the overall 
contracting world. So what we see isn't necessarily based on 
DOD reference to a lot of what is going on in Iraq and with DOD 
contractors. That is a problem there too. A lot of it goes back 
to our overall contracting system and what we developed in the 
mid-1990's, the buying of commercial items and services more 
like the private sector. The private sector makes the trade-off 
of profits versus key oversight. I don't think the Government 
can afford that same balancing test. I think we need to add 
more oversight to the process and there is certain types of 
contracts, commercial item contracts where Government officials 
don't have access to the cost or pricing data that they need.
    Mr. Pascrell. So this not just an executive problem. We 
can't shift the entire blame to the Executive branch of 
Government. The Congress cannot fulfill its oversight 
responsibilities under the Constitution. This is the 221st 
anniversary of the signing of the Constitution of the United 
States of America. It either is a working document or it is 
simply for awards, right, Mr. Amey?
    Mr. Amey. I would agree with that.
    Mr. Pascrell. So your conclusion is what today?
    Mr. Amey. To make sure that Federal agencies and 
contractors are spending taxpayer dollars wisely.
    Mr. Pascrell. So all of the discussions that we have had, 
has anyone gone to jail? I just thought I would ask the 
question.
    Mr. Amey. There are a few Department of Defense officials 
and I think there may be a few Department of Interior officials 
that may soon be going to prison.
    Mr. Pascrell. Make an announcement about that.
    Mr. Amey. It is major news around Washington, DC.
    Mr. Pascrell. You are laughing, but I know you are a 
serious person. This galls me, Mr. Chairman, that we are into a 
situation 7 years later and we are asking questions that we 
don't have resolution to. Not only do we have the longest war 
maybe in the history of mankind, you know. But we have the 
longest oversight which produced nothing. Now, let me see if I 
can figure that out.
    Mr. Carney. Well, figure it out in the next round of 
questions, Mr. Pascrell.
    Mr. Pearl, I was struck by your testimony, your written 
testimony about the flexibility aspect of what you should be 
able to offer. I would like you to explain how we are--become 
more flexible if we have to respond quickly to events. How do 
we on the one hand provide the kind of oversight and strong 
contractor we need while remaining flexible enough for the 
community you represent to react?
    Mr. Pearl. I am not just talking about flexibility, Mr. 
Chairman, within the private sector. I think that the 
flexibility has to come from the contracting officers and from 
the understanding of what the needs are toward the end mission. 
I think that the flexibility that I am talking about is 
precisely within the context of the contract. Even in the 
private sector, that, in essence, conditions change, 
circumstances change and that the recognition that you cannot 
state that this is the way it is going to be, because we are 
going to provide this amount at this price in this local, for 
example, in a hurricane situation when this point of fact, the 
hurricane may have hit 100 miles west or 200 miles south or 
whatever that might be.
    The flexibility is sometimes there might be transportation 
costs involved that you have to take into consideration. That 
is just a very minor example to what we are talking about. So 
the flexibility we are simply talking about is that when you 
have strong oversight, which we are calling for, and I agree 
with Mr. Pascrell, that we in the private sector benefit from 
greater oversight. I called for that in my written and oral 
testimony. We agree with that. If there is great oversight, if 
there is tremendous transparency, then point of fact that the 
parties working in partnership, and that is something we in the 
private sector have not seen as closely, that we have been kept 
at an arm's length, so that therefore, here is the contract, do 
it the way we want to do it, but we are not going to be 
partners in this enterprise in terms of the overall mission.
    What we are calling for is we have a greater partnership in 
any relationship that you have, a personal relationship--I have 
learned for 31 years after being married to a psychotherapist 
that the whole nature of being flexible is a necessary 
component toward a healthier relationship. Well, that is the 
kind of relationship that we in the private sector are looking 
for with respect to our partners in the public sector. That is 
the flexibility that we are talking about so that we can, in 
fact, meet the ultimate goal and mission.
    Mr. Carney. We are all married to psychotherapists, Mr. 
Pearl.
    Mr. Pearl. Mine is at home.
    Mr. Carney. Mr. Amey, you talk about creating a database, a 
contractor responsibility database. How could the Department 
benefit from that?
    Mr. Amey. I think it would allow the agency to make better 
contracting decisions where we have seen instances in the past, 
even just a few of the names of contractors that Representative 
Pascrell mentioned were contractors that have a very 
questionable track record. The FAR has a provision in that says 
the Government is supposed to contract with responsible 
contractors only it is very difficult to define who is 
responsible, who is not.
    Is an instance from 5 years ago still relevant now? But if 
you have violation--contract fraud violations, violations of 
the Foreign Corrupt Practices Act, different false claims given 
to the Government, product substitution. Those are instances I 
think contractors should know and should take into account when 
they are deciding to award a contract up-front, as well as 
suspension/debarment officials at the end.
    One of our claims is that the Department of Homeland 
Security hasn't taken--hasn't used the suspension and debarment 
process as much as it should. One of the questions I get from a 
different agency was if I would have known that contractor 
already entered into three administrative agreements, I would 
have never entered into the fourth. Government officials don't 
have the data necessary to make certain decisions that they 
need before and after awarding a contract.
    Mr. Carney. Ms. Madsen, do you agree?
    Ms. Madsen. Not exactly. I think there is probably a 
misapprehension there. To put an offer or a bid on a current 
contract today, the contractor has to disclose if he has 
settled any false claim, if he has false claims judgments 
against him, if he has any criminal penalties against him, if 
he has had any falsification of documents if he has had any 
environmental violations. So there is a process that already 
exists for every offer that is submitted for that information 
to be made available. The debarment suspension list is a public 
list--it is public. It is accessible on the Internet. So I am 
not quite sure what an additional database would add to all of 
that. This isn't something that our panel necessarily looked 
at. We did, however, say that particularly where we have got 
this blended workforce issue that there were additional 
protections of a different kind that needed to be put in place.
    Mr. Carney. Mr. Pearl.
    Mr. Pearl. I agree. I don't represent a single member who 
meets the essence of the questions that you were asking 
obviously. But seriously, I think that the context is that in a 
world where there is transparency and greater oversight and 
then the kinds of issues that POGO talks about will be dealt 
with in a much more open and fruitful fashion for everyone. I 
think that the whole nature of what the Chairman of this 
advisory board has said in terms of Ms. Madsen's frustration in 
getting as much data is something that we are in essence 
looking forward to as well. We want to see openness because it 
opens competition and it opens the sense of the kinds of issues 
and concerns that this subcommittee have.
    Mr. Carney. Thank you. Mr. Rogers.
    Mr. Rogers. Thank you, Mr. Chairman. I only have one 
question. I want to go back to something Mr. Amey made 
reference to a little while ago when he said that there are 
some folks who were offering seminars on how to get around 
competitive bidding. Tell me about this. Who is doing that?
    Mr. Amey. I can send you a list, but there are certain 
Beltway bandits out there that offer seminars and Government 
officials attend them, contractor employees attend them and one 
of the ones I have says avoid competition like the plague. We 
have seen different aspects of using small businesses, a lot of 
the ANCs--I won't say a lot. But there are been certain ANCs 
that have been used as a pass-through for larger contractors as 
a way to avoid competition, although everybody wants 
competition. It is funny, when I attended--I attended nearly 
all----
    Ms. Madsen. All.
    Mr. Amey. All the panel discussions. Nearly all. I had a 
very good attendance record. I will say it was very funny to 
hear some of the larger corporations when they were buying and 
they were buyers, they were talking about competition is 
essential, market research is essential. But when they are 
selling to the Government and they are on the other side, at 
that point we are not using the same measures that they were 
using as buyers. That is a little scary. It was people that we 
have very large contracts with.
    Mr. Rogers. I would love it if you would forward that list 
to the committee. I am sure the Chairman would like to see it 
as well. That is all I have, Mr. Chairman.
    Mr. Carney. Thank you, Mr. Rogers. Would you like to go, 
Mr. Pascrell?
    Mr. Pascrell. If you permit me, Mr. Chairman.
    Mr. Carney. You are permitted, sir.
    Mr. Pascrell. Thank you, sir. I wanted to just briefly tell 
the panel I think that most private contractors are hard-
working, decent human beings, by the way, and I think you feel 
the same way. Unfortunately, many who aren't fitting in that 
category do business with the Government and that is the 
problem. So, Ms. Madsen, I have a question for you. Previously 
reports have stated that over 50 percent of the dollar value of 
the Department of Homeland Security contracts was awarded 
without full and open competition. Fifty percent. How is this 
able to happen and what is being done to ensure that contract 
awards are made through a fair and open process?
    Ms. Madsen. We talked about this, I think, a little bit 
before you came in, but the data that the acquisition advisory 
panel developed Government-wide probably is not inconsistent 
with that number. We saw in 2004, 36 percent of contract awards 
were not competitive. We saw one offer of contracts increasing 
to about 20 percent--or by 20 percent--or to 20 percent I 
should say and we couldn't get reliable data on awards under 
large multiple-award IDIQs, so that number wouldn't surprise me 
as a Government-wide number. I think what has happened though 
in the intervening 2 years is that more protections have been 
put in place.
    So FPP has issued a strong competition policy. The 2008 
Defense Authorization Act put in place more protections for 
award of task and delivery orders under IDIQs, including the 
ability to protest those awards and better data collection.
    So there are steps that have been taken and there is 
pending legislation that would implement other of the 
acquisition advisory panel recommendations with respect to 
increasing competition. So those steps are being taken. So I 
would say that number for DHS, if you are looking at 2004-2005, 
that is probably not out of line with the rest of the 
Government would be my guess.
    Mr. Pascrell. Whose responsibility would it be to make sure 
that there is proper data? Who has ultimate responsibility for 
accumulating the data which you referred to in your 
presentation a moment ago?
    Ms. Madsen. GSA collects that data under a contract, what 
is called the Federal Procurement Data System, FPDS, which is 
actually the baseline for the new FADA data as well. So they 
collect data from all the agencies based on their contract 
awards. It is pretty intensive, but it doesn't pick up every 
detail.
    Mr. Pascrell. Well, 50 percent is more than every detail.
    Ms. Madsen. Well, it doesn't pick up details, at least it 
didn't at the time and I don't think it does yet, about these 
awards under multiple-award IDIQs. That is where the biggest 
gap is.
    Mr. Pascrell. Is that simply because--my final question--is 
that simply because they don't have the means to get the data? 
Is the data being withheld? What are the reasons?
    Ms. Madsen. What we were able to determine----
    Mr. Pascrell. I mean, we are talking about a lot of money 
here.
    Ms. Madsen. They didn't ask the question about the orders 
under IDIQs. The system was geared to get contract information, 
not order information. The orders under those vehicles grew 
very rapidly between, like, 2000 and 2004.
    Mr. Pascrell. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Carney. Thank you, Mr. Pascrell.
    No more business before the committee, we stand adjourned.
    Now, please be reminded that we may have written questions, 
and we would like a prompt reply.
    This committee stands adjourned.
    [Whereupon, at 4:08 p.m., the subcommittee was adjourned.]


                            A P P E N D I X

                              ----------                              

  Questions From Ranking Member Mike Rogers of Alabama for Richard K. 
  Gunderson, Deputy Chief Procurement Officer, Department of Homeland 
                                Security

                   DHS ACQUISITIONS TRAINING PROGRAMS

    Question 1. In your prepared statement (p. 7) you discuss the 
Acquisitions Professional Career Program. Can you update us on the 
current status of the Department's Acquisitions Training programs?
    Answer. While the initial focus has been on the certification 
standards and training development needs for contracting and program 
management, the Office of Chief Procurement Officer (OCPO) mission 
expands beyond those initial career fields and will ultimately address 
multiple acquisition career fields, including systems engineering, 
logistics and test and evaluation. The Acquisition Workforce Branch, 
within the OCPO, was funded a centralized acquisition work force 
training fund beginning in fiscal year 2008. OCPO has established a 
three-tiered approach for the centralized acquisition training program 
that includes: purchasing commercial-off-the-shelf courses; developing 
partnerships with other Government organizations such as the Federal 
Acquisition Institute (FAI) and the Defense Acquisition University 
(DAU) in order to leverage off already existing acquisition courses; 
and, developing DHS-specific classes in Acquisition. As with all new 
starts, the fiscal year 2008 continuing resolution impacted the 
centralized Acquisition Training Program. However, even with a late 
start, DHS was able to complete and field two new program management 
courses in partnership with DAU and fund the continuing development of 
three others that will be available in fiscal year 2009. Also, DHS was 
able to leverage its partnership with DAU and send DHS students to 
program management courses at DAU during fiscal year 2008. DHS started 
the development of five DHS-specific continuous learning modules and 
workshops, two of which were piloted in the last quarter of fiscal year 
2008 and three additional that will be ready by the end of the first 
quarter of fiscal year 2009. The Continuing Resolution had the most 
impact on the DHS's training strategy that was primarily based on 
commercial-off-the-shelf training which would be provided by vendors. 
As a result of the CR, DHS was not able to provide as much training as 
originally planned and relied more heavily on training available for 
other sources such as FAI and DAU. During fiscal year 2008 and into 
fiscal year 2009 the career development and training branches are 
working intently to build the infrastructure necessary to support the 
acquisition work force training needs including the establishment of a 
separate Training Office within the Acquisition Workforce Branch 
including such functions as forecasting needs, quota management/
distribution, and registration.
    Question 2. How do you think that, over time, this program will 
improve oversight of the Department's acquisitions?
    Answer. Direct oversight of programs and contracts is accomplished 
by Component acquisition professionals. OCPO is responsible for 
establishing the certification and training criteria to ensure they 
possess the requisite knowledge, skills and abilities to perform their 
functions. Program Managers, Contracting Officers, Contracting Officers 
Technical Representatives, and other acquisition career fields work 
together as an integrated team to ensure the successful execution of 
the program and ensure that the terms of the contract are met. OCPO 
will include all the disciplines necessary to achieve this end goal in 
its acquisition work force. This will include the development of 
certification programs for other such disciplines as Test and 
Evaluation, Systems Engineering, Logistics, etc. Certification programs 
include requirements for education, experience and training to ensure 
that all competencies required to successfully perform the respective 
acquisition function will be met.
    To achieve this goal, the centralized training program is designed 
to train the totality of the acquisition work force to be adaptive to 
the Department's needs through the 21st Century and close any critical 
skill gaps; these gaps are identified in the competency surveys as 
administered by the Office of Federal Procurement Policy within the 
Office of Management and Budget or are found through internal reviews 
and audits as well as recommendations from the General Accounting 
Office and DHS Inspector General. A key enabler to the acquisition work 
force's ability to making good business decisions in support of our 
Acquisition Programs is to have highly skilled and well-trained 
individuals in the decisionmaking roles. This strategy also includes 
the development of DHS certification standards broadening from solely 
Contracting and Program Managers into other areas of specialized 
acquisition knowledge, such as test and evaluation, systems 
engineering, and business cost financial estimating.
    In addition to the direct oversight being performed by the 
components, the CPO, in coordination with other Departmental 
executives, oversee program execution through the Acquisition 
Management review process. Programs are required to seek various 
approvals from the Department prior to execution. For example, Level I 
programs require an Investment Review Board, chaired by the Deputy 
Secretary, at key decision points in the acquisition life cycle. The 
Department has also implemented new Periodic Reporting of key program 
metrics to monitor cost, schedule and performance measures of select 
programs.
    Question 3. Have you had difficulty filling all the available spots 
in the DHS Acquisition Fellows Program and the Acquisitions 
Professional Career Program?
    Answer. The Acquisition Workforce branch within the Office of the 
Chief Procurement Officer has developed and implemented a vigorous 
recruitment strategy, targeting diversity, veterans, and universities 
across the continent for the Acquisition Professional Career Program 
(APCP). Since the APCP was a fiscal year 2008 startup the continuing 
resolution caused an initial pause in hiring. As with all new starts 
several challenges emerged in the actual hiring and security processes. 
However, we were able to meet a target of 49 hires, and we currently 
have 48 on-board. We anticipate meeting our fiscal year 2009 goal of 52 
additional hires, bringing the grand total of participants to 100.
    Question 4. What are the parameters of this program? After 
training, are ``students'' required to work at the Department for a 
number of years or are they free to depart for higher paying private 
sector jobs?
    Answer. The APCP is designed to be a 3-year entry level program 
targeting GS-7s, using the Federal Career Intern Program Hiring 
authority. Each participant in the contracting career field will be 
given an opportunity to complete three, single-year rotations through 
separate components aiding in the development of a ``one DHS'' culture. 
Throughout the 3 years the participants will be provided all the 
necessary certification training and experience to become Level II 
certified. The participants will also receive additional training in 
leadership and other competencies for successful performance, such as 
business writing, customer service and project management. Participants 
are also paired with a mentor through a formal centralized mentorship 
program.
    The participants of the APCP program are held to the same standard 
and regulations as any other Federal employee. They are bound by a time 
commitment of 3 years which is tied to a recruitment bonus which is 
given at the beginning of the commitment. If the participant is offered 
and accepts a recruitment bonus they must remain for 3 years or pay a 
prorated portion of the bonus back to the Treasury. Similar Federal 
guidelines for training and educational benefits received apply.
    Question 5. One of the challenges noted in the past has been the 
limited number of contracting professionals on board to support the 
programs. How has the CPO and the various DHS contracting organizations 
addressed this problem?
    Answer. DHS has addressed this challenge by utilizing the statutory 
authority to re-employ annuitants and position them to serve as mentors 
for the APCP participants. Also, each Head of Contracting for 
procurement signs an agreement to ensure that the participants of the 
program receive and are provide an adequate amount of supervision and 
guidance to develop them to become the future leaders within DHS.
    Question 6. In your prepared statement you discuss the aging 
acquisition work force Government-wide (p. 7). Moving forward, it 
appears this will be a challenge for all Government agencies. In your 
opinion, what steps can the Federal Government take to ensure a strong 
acquisition work force in the coming decades?
    Answer. Actions that could be taken to ensure a strong acquisition 
work force for the future include: continuing to support agency-
specific programs such as the Acquisition Professional Career Program; 
allowing agencies to continue to exercise available flexibilities such 
as re-employed annuitants and direct hire; as well as, permitting 
flexibilities such as special pay without having to expend significant 
effort in order to request this. Another significant improvement would 
be to encourage the Office of Personnel Management to consider the 
contracting career field to be professional vice ``administrative'' 
since there is a positive education requirement associated with the 
1102--Contract Specialist.
    Question 7. Can you give an example of successful contracts at the 
Department?
    Answer. The following examples demonstrate capability being 
delivered in support of the Department's missions:
Nurse Case Management
    The contract supports the Transportation Security Administration 
(TSA) in the management of an estimated 18,000 workers compensation 
claims arising from security screening and other work activities. 
Services include expertise to determine if medical intervention is 
required and provide nurse and medical case management services to 
ensure appropriate medical treatment is being provided to security 
screeners and other TSA employees. Also, the contractor assists in 
identifying suspicious or fraudulent claims, tracking trends and 
providing recommended process improvements in operations that may help 
reduce injuries and associated claims. The impact has been a 
significant decrease in the amount of long-term injury reports and a 
significant decrease in the number of days injured employees are out of 
work. The contractor has significantly reduced the number of 
longstanding workers compensation claims, which has assisted TSA in 
reducing its overall number.
National Voluntary and Abandonment and Hazardous Material Disposal
    This contract provides environmental management services to TSA to 
ensure the environmentally compliant management, collection, storage, 
packaging, transportation and disposal of hazardous materials 
voluntarily abandoned at airport security checkpoints and other TSA 
facilities, and other hazardous wastes generated by TSA. The contractor 
is responsible for providing management and support services, 
collection containers, container identification and marking, labeling, 
packaging, shipping, and final treatment/disposal for material 
collected in support of compliant disposal of hazardous voluntarily 
abandoned property at all TSA facilities, focusing on Federalized 
airports.
    The impact has been a reduction in the amount of abandoned items 
stored at the airports resulting in hazardous conditions such as 
collected fumes from abandoned lights, corroded batteries and leaking 
aerosols. The contract requires compliance with Federal, State, and 
local environmental laws and regulations. As a result, the contractor 
bears full responsibility for removal and destruction of said materials 
in a safe and environmentally compliant process, and assumed total risk 
in regards to environmental violations. In regards to non-hazardous 
material that are abandoned, those items are collected and donated to 
State Agency Surplus Program Offices that may sell or donate items to 
local non-profits, etc.
Electronic Detection Systems--CTX 9000/CTX 9400
    TSA negotiated the purchase of the CTX 9000/CTX 9400 Electronic 
Detection Systems, resulting in significant cost savings, product 
improvements, increased extended warranty, and an incentive fee for 
improved reliability of selected CTX 9000 units. After extensive 
negotiations, TSA negotiated a 9 percent reduction in unit price from 
the proposed amount, and built in an incentive to motivate the 
contractor to successfully reduce the Mean Time Between Critical 
Failure (MTBCF) of the equipment. The reduction of MTBCF is expected to 
enhance operations at the airports Nation-wide and result in lower 
future maintenance costs. This award also incorporated payment terms 
where the contractor would only receive payment if the MTBCF for a 
selected population of CTX 9000 improves after 18 months. Additionally, 
TSA obtained an extended warranty for an additional 5 months or 150 
days from the day of factory acceptance test.
Aircraft Cabin Training Simulators (ACTS)
    After a successful solicitation and evaluation, Newton Design and 
Fabrication, Inc.--a HubZone business located in Catoosa, OK--was 
awarded a contract for Aircraft Cabin Training Simulators (ACTS). Two 
delivery orders initiated at award provided for four simulators: a 
double-decker hybrid unit (747 on top/767 on bottom) and a 737 single 
unit for the Federal Air Marshal Atlantic City Training Center (FAMTC); 
and a dual hybrid unit (737 on one side/767 on the other) for the 
Federal Flight Deck Officer (FFDO) Dallas training office. These 
simulators will serve many purposes for FAMTC, FFDO and Crew Member 
Self Defense (CMSD) Training. The contract allows for future simulator 
purchases as well as accessory components as needed. This award will 
benefit TSA by providing a realistic aircraft training environment that 
allows for multiple training scenarios and use by the FAMS, FFDO's and 
Flight-Crew Members. These state-of-the-art units were specialized to 
withstand the ballistic requirements of the training ammunition and 
dynamic training environment, be readily maintainable throughout their 
life cycles, and can be moved, enhanced, and reconfigured to adapt to 
changes in the training programs.
HC-144A ``Ocean Sentry'' Maritime Patrol Aircraft
    An integral piece of the Coast Guard's Deepwater Major Acquisition 
Program, the HC-144As will replace the Service's aging fleet of HU-25 
Falcon jets. The HC-144A is a derivative of the EADS/CASA CN-235-300 
and significantly enhances the mission execution capability of Coast 
Guard aircrews. This fixed-wing turbo prop aircraft will perform 
various missions, including maritime patrol, law enforcement, search 
and rescue, disaster response, and cargo and personnel transport. 
Additionally, the ``Ocean Sentry'' provides the added operational 
capability of a hydraulic-operated rear ramp, with superb fuel 
efficiency--consuming less fuel than the HU-25 or HC-130. The HC-144A 
project calls for delivery of 36 aircraft. To date, the Coast Guard has 
accepted delivery of the first five HC-144A aircraft, with an 
additional three on contract for delivery.
HH/MH-65C ``Dolphin'' Multi-Mission Cutter Helicopter
    The HH/MH-65C helicopter conversion project adds equipment, 
including two Turbomeca Ariel 2C2-CG turbo shaft engines, armor, gun 
mounts, weapons and ammunition for AUF. The new engines provide 
approximately 40 percent more power than those they replaced, enabling 
improved reliability, endurance payload and performance. The HH-65Cs 
will also have improved C4ISR electronic equipment suites; and day-
night/all-weather capability with radar and electro-optic/infrared 
sensors. Improved mission capabilities include the ability to provide 
surveillance and to apply force against a maritime target up to 150 
nautical miles from a host cutter. To date, all 97 HH-65s have been re-
engined, upgraded and converted to the HH-65C configuration at the ARSC 
in Elizabeth City, N.C., and at an American Eurocopter facility in 
Columbus, Miss.

                           SBINET: PROJECT 28

    Question 8. In hindsight, is it accurate to say that the Department 
benefited from the fact that Project 28 was a performance-based 
acquisition?
    Answer. A performance-based contract is an appropriate tool to 
accomplish the SBInet goal of integrating new and existing border 
technology into a single, comprehensive border security system that 
will enable Customs and Border Protection (CBP) to more effectively 
detect, identify, and respond to incursions at the border. 
Specifically, SBInet is being developed through a series of 
performance-based task orders that allow the Government to identify the 
outcomes/results that the contractor must achieve and requiring the 
contractor to deliver a solution which demonstrates the stated 
objectives. CBP sets the performance requirements for the project and 
Boeing develops the approach to meet these requirements, maximizing the 
use of commercial off-the-shelf technology and innovative solutions.
    Project 28 was designed to test the initial suite of SBInet 
capabilities under a pilot or prototype effort as the system's 
technology foundation. Project 28's proof of concept was intended to: 
(1) Demonstrate the feasibility of Boeing's SBInet solution; and, (2) 
establish baseline performance characteristics against the SBInet 
performance targets included in the master contract. By using a fixed-
price performance based contract with specific measureable outcomes, 
the Government was able to evaluate the technical approach, 
achievability, and feasibility of Boeing's overall SBInet solution on a 
small scale with limited financial exposure. This approach provided a 
number of lessons learned that will be implemented in future segments, 
ultimately improving performance, reducing risk, and improving cost 
performance.

                         ACQUISITION MANAGEMENT

    Question 9. Could you provide some background on what the 
Department has done to ensure that contractors are not affecting 
inherently governmental decisionmaking or influencing long-term DHS 
policy?
    Answer. At the Department of Homeland Security (DHS) and across the 
Government, there is a need to be increasingly sensitive to 
organizational conflicts of interest issues that may arise through 
contracting for services and products. Across the board, contractors 
bring a wealth of cost-effective and often unique experience, 
information, management and technical skills to the Department. As a 
result, DHS relies on contractors to perform mission support 
requirements and relies on those same skills and capabilities to 
provide required technical assistance in the preparation, review and 
administration of many contracts. However, DHS has been very careful 
not to allow contractors to perform inherently governmental oversight 
functions or other inherently governmental functions, such as 
determining contract requirements. For example, at DHS, all warranted 
Contracting Officers and all Contracting Officers Technical 
Representatives (COTRs) are considered inherently governmental. These 
capabilities are sometimes supplemented by qualified contractors that 
have been cleared of potential conflicts-of-interest.
    The Office of the Chief Procurement Officer (OCPO) has taken steps 
to issue policy on this topic and integrate it into the training of 
acquisition personnel. The Office of Federal Procurement Policy (OFPP) 
Letter 93-1, Management Oversight of Service Contracting, is 
disseminated and discussed during the DHS training for Contracting 
Officers and Contracting Officer Technical Representatives. DHS 
officials have coordinated with the Defense Acquisition University's 
course director for COTR training to ensure that coverage of OFPP 
Letter 93-1 is included in training at the university.
    On March 6, 2008, then Deputy Under Secretary for Management, 
Elaine Duke, issued the annual DHS Federal Activities Inventory Reform 
(FAIR) Act (Pub. L. 105-270) data call to Heads of DHS Headquarters and 
Component organizations. That data call requested DHS Components to 
review both their in-house and contract mission and administrative 
workload to be sure that contracts awarded as a part of our stand-up 
may not now be more appropriate for recurring performance by Federal 
employees. We specifically asked the Components to be sure that 
inherently governmental work and minimum residual core capability 
requirements (FAIR Act commercial function Reason Code A) had not been 
outsourced.
    We consider this review to be an important part of our work force 
planning effort and have included it into the DHS Workforce Planning 
Guide, to assure that short- and long-term work force and skill gaps 
are being met. In accordance with the Secretary's goal to strengthen 
and further unify our capabilities, we are continuing to ensure that no 
inherently governmental work has been awarded to contract. To date, we 
have found no instances of contracting inherently governmental work nor 
have we identified any work that would be justified for conversion to 
in-house performance on a solely economic (cost) basis. We have, 
however, found several instances where work is being converted from 
contract to in-house performance to assure that minimum core 
capabilities are being met and, in some instances, to permit the full 
(better) utilization of other Federal positions that are engaged in 
inherently governmental work. At NPPD, for example, approximately 250 
Full-Time-Equivalents (FTE), to include budget, financial, program and 
technical operations management support, have been scheduled for 
conversion to in-house performance.
    Question 10. What controls are currently in place and/or being 
instituted to monitor the entire life cycle of new and existing 
programs?
    Answer. One of the OCPO's priorities is Quality Acquisition 
Management, focused on strengthening program management, cost analysis, 
logistics, systems engineering and test and evaluation. In support of 
this priority, OCPO initiated an Acquisition Re-Engineering effort 
which examined component and departmental acquisition program controls 
and monitoring. Results include of this effort include:
    Expanding Departmental Acquisition Staff.--DHS established a Senior 
Executive-led Acquisition Program Management Division (APMD) within the 
Office of the Chief Procurement Officer. APMD currently has nine staff 
positions, and is approved to increase to 18 staff in fiscal year 2009. 
DHS has also established a senior executive-led Cost Analysis Division 
(CAD) within the OCPO to provide cost estimating guidance and to 
provide oversight of program cost estimates. CAD currently has three 
staff positions, is approved to increase to six members.
    Improvement of the Existing Investment Review Board Process.--To 
focus on up-front identification and staffing of program issues, thus 
focusing the Investment Review Board (IRB) discussion on program 
execution and challenges. The Acquisition Decision Memorandum resulting 
from the IRB is similarly focused on providing program direction and 
assigning specific actions required to resolve these issues.
    More Reviews Conducted.--During the period from September 2007 to 
the present, APMD has conducted 37 quick-look program reviews, two 
Independent Review Team level program reviews, and piloted a much 
improved IRB process. As of the end of September 2008, eight IRBs have 
been conducted, with eight more scheduled through December 2008.
    Revision and Expansion of the DHS Periodic Reporting System.--The 
revised system is centered on the parameters established in the 
Acquisition Program Baseline, but includes other commonly accepted best 
practice metrics, such as standardized Earned Value Metrics, and a 
Probability of Program Success assessment technique modeled after 
similar systems at DoD, USCG, and other agencies. It will also record 
and track ADM actions.
    Significant Revision to the Department Acquisition Policy and 
Process (APB).--APMD has created a new Acquisition Directive (102-01), 
accompanied by an Instruction (120-01-001), that replaces Directive 
1400 and lays out a comprehensive acquisition lifecycle framework and 
acquisition policy and process. Supporting the instruction are 
appendices providing detailed information on critical acquisition-
related products and processes. These are scheduled for interim 
implementation during first quarter fiscal year 2009.
    Strengthening of Program Acquisition Program Baselines.--APMD is 
working with individual Level I program offices to strengthen APB; 
which document a program's cost, schedule and performance metric's 
thresholds and objectives. This effort involves a collaborative 
headquarters/program review which results in consistent definition of 
the program's cost, schedule and performance parameters, along with 
development of quantifiable metrics from which progress can be measured 
and assessed. The program leaves the process with an APB improved in 
both format and content.
    Improved Life Cycle Cost Estimating.--The Cost Analysis Division is 
focused on instilling best cost estimating practices using the 
Government Accountability Office Cost Estimating Guide as the 
benchmark. The goal is to develop credible and supportable program and 
project cost estimates to support budgetary decisions. Once programs 
have well-defined and documented cost estimates they serve as the 
foundation and basis for the periodic reporting system. We are 
initially incorporating this capability at all development and 
production decisions for all Level I programs.

     HURRICANE IKE DISASTER RELIEF AND TEMPORARY HOUSING CONTRACTS

    Question 11. Can you describe what acquisition control structures 
are in place, particularly at FEMA, that will ensure taxpayer dollars 
are not wasted during the Hurricane Ike relief efforts?
    Answer. The Federal Emergency Management Agency (FEMA) continues to 
build their acquisition community and acquisition control structure by 
taking the following measures:
    Enhanced Acquisition Capability and Capacity.--FEMA's Office of 
Acquisition Management has grown from a staff of approximately 35 
Contracting positions to approximately 235 Acquisition professionals. 
The office has also matured through the creation of three separate 
branches that support the acquisition life-cycle and provide the 
framework for FEMA's acquisition processes and practices. The 
Acquisition Operations Branch provides pre- and post-award contracting 
and acquisition support and includes a staff of approximately 180 
Contracting Officers, Contract Specialists, Procurement Analysts, and 
Support Staff.
    Pre-Positioned/Pre-Competed Contracts.--FEMA has implemented 
several pre-positioned contracts in response to the need for advance 
planning and preparation. FEMA currently has approximately 75 pre-
positioned contracts in its inventory. In response to the recent 
Hurricanes, FEMA activated its ground and air ambulance evacuation 
services contract with American Medical Response, Inc. and its rail 
evacuation services contract with AMTRAK. These are examples of 
successful, pre-positioned contracts for disaster and emergency 
response.
    Increased Contracting Visibility in the Field.--When the scale of a 
disaster merits increased on-sight oversight of field operations, FEMA 
designates and deploys an Acquisition Advisor to the Joint Field 
Office. This role has been utilized in response to both Hurricanes 
Gustav and Ike. The purpose and role of the Acquisition Advisor is to 
counsel the Federal Coordinating Officer (FCO) on the acquisition 
process and regulations, and provide oversight to ensure internal 
controls are in place and protocols are followed to avoid fraud, waste, 
abuse, and unauthorized commitments. The advisor also reaches back to 
the Headquarters office to ensure greater coordination of effort and 
use of FEMA acquisition staff both from Washington, DC and in the 
field. Recently, due to the increased staffing levels, FEMA was able to 
pre-deploy contracting professionals in advance of declared disasters 
events. This enabled the acquisition staff to be prepared to respond 
and provide immediate support to the field operations staff--while the 
FEMA contracting staff at Headquarters executed against the pre-
positioned contracts for other mission needs. Additionally, Contracting 
Officers were deployed with FEMA's Incident Management Assistance Team 
and Urban Search & Rescue teams--providing direct support to those 
teams as part of each team.
    Enhanced Contract Oversight.--FEMA has developed a robust COTR 
program that tracks and monitors the skill levels of personnel trained 
as COTRs, enables FEMA's programs and COTRs to quickly identify 
personnel with the appropriate COTR skills, and provides the necessary 
support to the COTRs as they perform their job duties. Currently, there 
are 1,008 certified FEMA COTRs. FEMA is also implementing an initiative 
to tier the COTR certification process, which recognizes that not all 
COTRs are alike and that certain contracts require COTRs with higher 
skill levels and experience to ensure proper contract oversight. 
Finally, to ensure a more controlled requirements development process, 
the approvals levels for high-value procurement requisitions now 
require a higher level signature authority within FEMA than previously 
required; this has helped to validate the requirements before they come 
to the acquisition office for contract action.
    In addition, within the OCPO, there are three interrelated missions 
that provide an acquisition control infrastructure. First, the Head of 
Contracting Activity Desk Officer branch maintains cognizance of key 
acquisition activities and resolving issues associated with complex, 
multi-billion dollar program investments by providing support to the 
Component's Head of Contracting Activity and their staff. Second, the 
Acquisition Oversight branch has undertaken activities to verify the 
integrity of DHS procurement practices that will lead to strengthening 
DHS' ability to ensure an effective and accountable acquisition 
function. Third, the APMD provides outreach support to the Department's 
program offices to ensure the application of sound program management 
principles. Since its creation, the division has worked collaboratively 
with representatives across the Department to develop a revised 
Acquisition Management framework that will provide the governance of 
DHS' investment programs. This effort, combined with a revised 
requirements process that APMD is formulating will serve as the 
foundation of DHS' investment decision process. To ensure that taxpayer 
dollars are not wasted during on-going relief efforts for Hurricane 
Ike, OCPO has actively been participating in FEMA Contract Review 
Boards (CRBs), to ensure that the requirement is adequately defined, 
and documents comply with the FAR and DHS regulations, policies, 
procedures, and practices.
   Question From Ranking Member Mike Rogers of Alabama for James L. 
   Taylor, Deputy Inspector General, Department of Homeland Security

     HURRICANE IKE DISASTER RELIEF AND TEMPORARY HOUSING CONTRACTS

    Question. Are you confident that DHS and FEMA are better equipped 
to oversee disaster relief contracts during the current crisis?
    Answer. We are confident that FEMA is better equipped now to 
oversee disaster relief contracts than it was in the wake of Hurricane 
Katrina. However, we believe there is still considerable room for 
improvement before we can be assured that FEMA is fully prepared to 
provide needed disaster relief while providing good stewardship of 
taxpayer funds.
    As of October 9, 2008, FEMA obligated $196,688,827 through 232 
contracts for Hurricane Gustav and obligated $216,340,900 through 245 
contracts for Hurricane Ike. This includes contracts for services, such 
as catering for first responders, janitorial services at special needs 
shelters, and installation of temporary housing units, as well as 
contracts for commodities such as meals, water, and tarps.
    In past reviews, we found that FEMA's acquisition function suffered 
from shortcomings in several areas, including work force, information 
systems, and post-award oversight. While FEMA has made improvements in 
these areas and continues to strengthen its acquisition function, there 
is much work still to be done.
    When the 2005 Gulf Coast hurricanes struck, FEMA's acquisition work 
force consisted of just 42 employees. FEMA now has more than 126 
acquisition-related positions filled and is authorized to fill 155 
positions. FEMA needs to fill all of its authorized positions and 
ensure that the acquisition work force is fully trained to carry out 
its duties.
    Another area where FEMA still has work to do is in the systems it 
uses to support the acquisition function. In April 2007, we reported 
that FEMA was using outdated and nonintegrated information systems. 
FEMA officials told us they were putting into place the PRISM contract 
writing system and that this would improve their ability to award and 
track disaster contracts. FEMA told us it expected to begin using PRISM 
in February 2008, but this has not yet happened. FEMA continues to use 
its outdated systems, limiting its ability to manage disaster contracts 
and protect against waste, fraud and abuse.
    FEMA must also continue to improve the contracting officer's 
technical representative (COTR) function. COTRs provide important 
programmatic oversight for disaster contracts. FEMA is currently 
engaged in developing and implementing stronger COTR requirements and 
better training, and it is critical that FEMA continues these efforts. 
Our office plans to work in this area in 2009.

   Questions From Ranking Member Mike Rogers of Alabama for John P. 
   Hutton, Director, Acquisition and Sourcing Management, Government 
                         Accountability Office

                           SBINET: PROJECT 28

    Question 1. Is Project 28 an example of the benefits of 
performance-based contracting in the sense that risk is assumed by the 
contractor and it is ultimately responsible for cost overruns?
    Answer. We reviewed the performance-based characteristics of 
SBInet's Project 28 in GAO-08-263: Department of Homeland Security: 
Better Planning and Assessment Needed to Improve Outcomes for Complex 
Service Acquisitions. A performance-based approach includes: A 
performance work statement that describes outcome-oriented requirements 
in terms of results rather than the methods of performing the work; 
measurable performance standards describing how to measure contractor 
performance in terms of quality, timeliness, and quantity; and the 
method of assessing contractor performance against performance 
standards, commonly accomplished through the use of a quality assurance 
surveillance plan. These characteristics, if properly implemented, can 
help ensure that services meet cost, schedule and performance 
requirements, thereby reducing risk to the Government and improving 
service acquisition outcomes. To further minimize the Government's 
risk, Federal procurement law establishes a preference for using firm 
fixed-price contracts or task orders--where a specific price is paid 
regardless of a contractor's incurred costs--when using a performance-
based approach. While we reported that SBInet's Project 28 did not 
incorporate all performance-based characteristics, such as well-defined 
requirements and a complete set of measurable performance standards, it 
was structured as firm fixed-price, and the Government was not 
responsible for costs incurred by the contractor over the original 
contract amount.

                             LINE AUTHORITY

    Question 2. In your reviews of the Department's acquisition and 
contracting programs, do you see the lack of line authority in the 
procurement functions of the Department as a problem? If so, what 
solutions do you recommend?
    Answer. DHS's acquisition function relies on a structure of dual 
accountability, and cooperation and collaboration among DHS components 
to accomplish the Department's goals. Each component procurement 
organization has a Head of Contracting Activity who reports directly to 
the component head and indirectly to the Chief Procurement Officer 
(CPO). While this structure was intended to make efficient use of 
resources Department-wide, it leaves unclear the CPO's enforcement 
authority over the components. For example, DHS's Acquisition Line of 
Business Integration and Management Directive created unclear working 
relationships between the CPO and the DHS component heads and does not 
apply to the Coast Guard or Secret Service. Our prior work has found 
that in a highly functioning acquisition organization, the CPO is in a 
position to oversee compliance with acquisition policies and processes 
by implementing strong oversight mechanisms. In March 2005, we 
recommended that the Secretary: Provide the CPO with sufficient 
enforcement authority and resources to provide effective oversight of 
DHS's acquisition policies and procedures; and revise the Management 
Directive to eliminate the exemption for the Coast Guard and Secret 
Service. In September 2006, we reported that the Secretary had not 
taken action to ensure Department-wide acquisition oversight, and we 
included a matter for consideration to the Congress to require the 
Secretary to report on efforts to provide the CPO with such authority. 
In our June 2007 review of the Department's acquisition oversight 
program, we reported while the CPO can make recommendations based on 
oversight reviews, the component head ultimately determines what, if 
any, action will be taken. DHS stated in June 2007 that they were in 
the process of modifying the Acquisition Line of Business Integration 
and Management Directive to ensure that no acquisition organization is 
exempt; however, this directive has not yet been revised.

   Question From Ranking Member Mike Rogers of Alabama for Marcia G. 
               Madsen, Chair, Acquisition Advisory Panel

  GROWTH OF GOVERNMENT CONTRACTING AND THE ACQUISITION ADVISORY PANEL 
                                 REPORT

    Question. What are the implications for the acquisition system as a 
result of the growth in the Government's purchase of services?
    Answer. Response was not received at the time of publication.

  Question From Ranking Member Mike Rogers of Alabama for Scott Amey, 
            General Counsel, Project On Government Oversight

  GROWTH OF GOVERNMENT CONTRACTING AND THE ACQUISITION ADVISORY PANEL 
                                 REPORT

    Question. In your opinion, what can this Congress and the next 
administration do to limit contract abuse and mismanagement?
    Answer. On October 20, 2008, POGO recommended good Government 
reforms for the Presidential transition teams. These recommendations 
are applicable to actions that could be taken up in the 111th 
Congress--actions for improving the Government work force, contract 
spending, transparency, and accountability. POGO believes that the 
implementation of the attached recommendations will help put the 
country on the right track to a more effective, accountable, open, and 
honest Government--one that is truly responsive to the needs of its 
citizens.

                               Attachment

                  RECOMMENDATIONS FOR TRANSITION TEAMS

    Over the past 27 years, the Project On Government Oversight (POGO) 
has worked toward achieving a more accountable Federal Government. 
During that time, POGO has enjoyed a strong working relationship with 
your Senate office [Senator McCain and Senator Obama] working toward 
this goal, and thanks you for your efforts on Government reform issues.
    If elected, your administration will need to make several reforms. 
The implementation of the following recommendations will help put the 
country on the right track to a more effective, accountable, open, and 
honest Government--one that is truly responsive to the needs of its 
citizens. Furthermore, while it is always a goal to have the best 
possible Government at the lowest feasible cost, the financial crisis 
our country faces makes it even more imperative that the next President 
more effectively use Government resources. POGO believes our 
recommendations will make significant strides toward shrinking the cost 
of Government operations, while at the same time making them work 
better. The initial costs of these reforms will be more than offset by 
the long-term savings for the taxpayer.
    We welcome the opportunity to provide more in-depth details about 
our proposals.
Effective
    Problem: Some Federal agencies are no longer accomplishing their 
mandated missions. Other agencies are working toward missions that are 
no longer relevant to 21st Century challenges. Agencies are already 
engaged in strategic planning and self-evaluation through the 
Government Performance and Results Act (GPRA) and Performance 
Assessment Rating Tool (PART) processes. However, this information is 
used infrequently. Furthermore, such efforts generally focus more on 
quantifiable measures of success, and inadequately measure the quality 
and relevance of the work of the agency--in other words the output of 
an agency rather than the impact of its work.
    POGO Recommends: The Presidential transition team should review 
each agency by assembling agency-specific teams of long-time civil 
servants, former political appointees from both parties, and 
stakeholders of the agency's work to determine how well or how poorly 
each agency is accomplishing its mission, and whether that mission 
addresses modern public policy needs. In the first 100 days of the 
administration, those teams should hold a public comment period and 
regional town hall meetings to allow the public to voice grievances and 
suggest improvements for the agency's operations. While it will also be 
important to review the useful agency performance data collected 
through GPRA and PART, it is essential to put that information in 
context.
    Problem: Essential public services that are arguably ``inherently 
governmental functions'' are frequently privatized. POGO is concerned 
that the aggressive outsourcing of Government functions may have 
allowed private contractors to be in the improper position of advancing 
private interests ahead of the public good.
    POGO Recommends: The new President should make it a priority to 
assess the extent to which outsourcing of previously governmental 
functions has undermined accountability, effective management, and 
policymaking in Federal agencies. Transition team members and new 
appointees should review FAIR Act inventories, protests, and job 
descriptions over the past decade, as well as interview career 
employees and agency ethics officers, to identify instances of 
improperly privatized inherently governmental functions. Regulations 
need to be strengthened to prevent future instances of problematic 
outsourcing, and any identified inherently governmental positions 
should be promptly filled by public servants.
    Problem: Some political appointees are undermining the 
effectiveness of critical agencies. In fact, some political appointees 
are inadequately qualified or not qualified at all for their positions. 
Others might have the requisite administrative experience but do not 
believe in the mission of their agency. Still others are negatively 
qualified, having lobbied and worked to undermine or defeat the 
missions of the agencies they have been appointed to lead.
    POGO Recommends: The President should emphasize qualified and un-
conflicted experience when appointing individuals to office. The 
President should also review whether a number of the current 4,000 
political slots should be converted to civil service status in order to 
enhance senior level institutional memory and competence at the agency.
    Problem: The Federal Government is struggling to retain skilled 
employees because those employees can frequently make more money doing 
comparable work as Federal contractors. In some cases the Federal 
Government expends resources to train an employee to work for an 
agency, only to have that employee go through the ``revolving door'' to 
work outside the Government for a contractor, private law firm, 
industry association, or lobbying shop. As a result, the Government 
ends up with ``brain drain'' while paying more for contractors to do 
work that could have been done by Federal employees.
    POGO Recommends: The President should change the culture of what it 
means to be a civil servant in order to make Federal employment more 
attractive to the most skilled individuals. Policies to consider 
include changing pay scales to make them competitive with those in 
equivalent private-sector jobs, instituting agency honors programs, 
paying student loans in return for a period of civil service, allowing 
retired civil servants to retain their pensions even if they are 
rehired by the Government, and limiting the total cost paid by the 
Government for a contractor employee performing the equivalent work of 
a Federal employee. Recognizing that the contractor work force is a de 
facto part of the Government, this effort should actually shrink the 
total footprint of the Government.
    Problem: Many Federal employees look the other way when they 
recognize waste, fraud, mismanagement, and abuse because they lack 
sufficient whistleblower protections against retaliation. Absent such 
protections, the Federal Government cannot expect its employees to 
disclose mistakes and practices that must be corrected in order for the 
Government to operate efficiently and effectively.
    POGO Recommends: The President should issue an Executive Order to 
strengthen Federal employee whistleblower protections, including strict 
administrative, civil, and criminal penalties for officials that 
retaliate against whistleblowers. The Executive Order should also 
include rewards such as commendations, public recognition, and monetary 
awards for Federal employees who disclose waste, fraud, and abuse, or 
who suggest ways to improve the operations of their agency.
    Problem: Inspectors General (IG) have been encouraged through the 
past two administrations to be part of the agency management team, 
rather than to be ``junkyard dogs'' in seeking out waste, fraud, and 
abuse at their respective agencies. As a result, some IGs have moved 
more toward program management, rather than functioning as the 
independent and objective watchdogs envisioned by the IG law.
    POGO Recommends: The Executive branch should reinvigorate the 
independence of Inspectors General by recognizing the need for them to 
be strong in-house watchdogs, not an arm of agency management.
Accountable
    Problem: Oversight functions at agencies across the Federal 
Government have been decimated. Federal officials also lack the 
enforcement tools needed to prevent, detect, and remedy waste, fraud, 
and abuse in Federal spending. From the Department of Defense to the 
Department of Interior and Food and Drug Administration, the offices 
and functions that can prevent corruption, waste, and mismanagement 
have been underfunded, defanged, or co-opted by the entities they were 
intended to oversee.
    POGO Recommends: While assessing each agency's operations, the 
President should pay special attention to oversight offices--and 
particularly the entity to whom those offices report--to ensure that 
oversight functions are adequately independent, and that the offices 
are afforded the resources, authority, and incentives to provide 
rigorous oversight. The President should also implement the 
recommendations contained in the National Procurement Fraud Task Force 
Legislation Committee White Paper, in order to allow Federal officials 
to hold recipients of Federal funds accountable.
    Problem: The Federal acquisition work force is currently 
overwhelmed and staff levels are inadequate to oversee Federal 
Government contracts. Contracting dollars have doubled since the 
beginning of the decade, yet the acquisition work force has remained 
constant, and in some agencies is significantly smaller.
    POGO Recommends: The President should expand the Federal 
acquisition, auditing, and accounting work force in order to improve 
oversight and promote integrity in Federal spending. Improving 
oversight will enhance contract management, resulting in savings that 
would more than pay for this expansion. A strong oversight work force 
can help the Government get better returns for the taxpayer on goods 
and services and also help prevent programs from falling behind 
schedule and running over budget.
    Problem: The Federal contracting system is prone to abuse and it 
prevents Government officials from ensuring that taxpayers are paying 
fair and reasonable prices for goods and services. Specifically, sole-
source contracts and contract bundling undermine competition and lead 
to waste, fraud, and abuse. To receive quality goods and services at 
the lowest practicable cost, the Government must encourage competition. 
Contract bundling, where the delivery of many often-unrelated goods and 
services are gathered under a single contract, dramatically reduces 
competition and transparency in Government contracting.
    POGO Recommends: The Government must eliminate or, at the very 
least, limit the use of risky contracting vehicles and provide 
contracting and program officers and oversight staff with the necessary 
tools to effectively manage Government spending. The Government must 
have contractor cost or pricing data so that it can make well-informed 
spending decisions.
    Government agencies should also conduct full and open competitions, 
to the maximum extent practicable, for all non-urgent purchases. 
Agencies should require genuinely competitive bids for task and 
delivery orders before the contract can be considered ``competitive.'' 
Sole-source contracts should be used sparingly, and the Government 
should ensure that non-competitive contract pricing is fair and 
reasonable.
    The Federal Government should avoid contract bundling in future 
contracts in order to increase contracting competition. Agencies should 
consider un-bundling existing contracts.
    Problem: The Constitution assigns the President the responsibility 
of enforcing laws passed by Congress, but the recent abuse of executive 
signing statements has allowed the President to improperly infringe 
upon the Congress's legislative role. These signing statements direct 
agencies to ignore sections of the bills with which he disagrees, 
generally asserting that those sections would present impermissible 
constraints on the President's power as Commander-in-Chief. The 
statements have very clearly ordered his subordinates at Federal 
agencies not to obey more than 1,100 sections of different laws. Many 
of these sections would have provided Congress and the public with 
additional information and transparency about the activities of 
executive agencies.
    POGO Recommends: The newly elected President should rescind these 
signing statements and pledge that if he strongly disagrees with 
sections of a bill, he will veto it.
Open
    Problem: Much information about Government operations is not made 
readily available to the public. Members of the public must frequently 
file Freedom of Information Act (FOIA) requests in order to learn about 
the performance and actions of their Government.
    POGO Recommends: As a matter of practice, the Federal Government 
should place on-line all new Government-generated or Government-
collected information that is not exempt from FOIA. Furthermore, 
instead of withholding an entire document that contains information 
that cannot be released, the Government should release the document 
with that information redacted. The Federal Government should 
automatically post all this releasable information at publicly 
available agency web sites.
    All information released through FOIA should promptly be made 
available on-line. This will decrease the need for duplicate FOIA 
requests that now contribute to the large FOIA request backlogs. 
Furthermore, agency budgets must allow for these changes, accounting 
for increased staff to handle posting new agency information, as well 
as providing adequate resources to support chronically under-funded 
FOIA offices.
    Problem: The Executive branch frequently overclassifies and uses 
pseudo-classifications, such as Sensitive But Unclassified (SBU) and 
Controlled Unclassified Information (CUI), to withhold information from 
the public. Often the apparent reason is not the legitimate need for 
secrecy, but the concealment of embarrassing information, including 
mistakes.
    POGO Recommends: The Executive branch should protect only 
legitimate national security and privacy concerns, and it should 
penalize agencies that violate these standards.
    Problem: The Federal Government cannot make contractor 
responsibility determinations. The Federal Government is the world's 
largest consumer of goods and services. As such, it has tremendous 
buying power to encourage good corporate behavior. However, the 
Government lacks a system to ensure that contracts are awarded only to 
responsible contractors, as is required by law.
    POGO Recommends: The President should immediately implement and 
fund the congressionally mandated database of information regarding the 
integrity and performance of contractors, entities, and persons awarded 
Federal contracts and grants. The database should detail the instances 
in which contractors and grant recipients have defrauded the 
Government, violated laws and regulations, had poor work performance, 
or had their contracts or grants terminated for default. This database 
should be made publicly available.
    Problem: The Federal contracting and grant-making system is opaque. 
The Government lacks rules to ensure that the contracting and grant-
making process is open to the public.
    POGO Recommends: To restore public faith in Federal spending, 
agencies should announce and promptly publish on-line all new and 
existing contracts, grants, and task and delivery orders above 
$100,000, as well as requests for proposals and solicitations, contract 
or grant data, award decisions and justifications, audits, and other 
related reports.
Honest
    Problem: The revolving door between the Government and contractors 
or regulated industries inevitably creates conflicts of interest and 
undermines the public's faith in the Government. The revolving door 
undermines the basic obligations of public service to place loyalty to 
the Constitution, laws, and ethical principles above personal or 
private gain.
    POGO Recommends: The President should issue an Executive Order that 
Executive branch employees, including political appointees, must 
consider their position a matter of public trust and service, not a 
stepping stone for personal gain. Once they leave Government service, 
there should be a 3-year prohibition against public employees and 
officials working for or representing industries or other private 
interests that they regulated, contracted with, or otherwise oversaw. 
Similarly, the President should exercise great caution in appointing 
individuals with ties to the industry they will oversee. The Office of 
Government Ethics and agency ethics offices should be given 
administrative enforcement power over violations of ethics, as well as 
the necessary resources to execute this new mandate.
    Problem: Executive branch advisory committees have a large impact 
on policy but are exempt from most ethics measures and restrictions. 
This can lead to conflicts between public and private interests. Often, 
advisory committee members--also known as ``special Government 
employees''--work for the industries that benefit from the policies 
they are recommending.
    POGO Recommends: The next President should reconsider the Executive 
branch's use of advisory committees. If such committees are to be 
continued, they should include, but not unduly rely on, private 
interests. The President should ensure that unclassified portions of 
advisory committee meetings and minutes are available on the internet. 
When Federal advisory committee members recuse themselves from any 
discussion of matters in which they or their private employers or 
clients have a significant financial interest, this disclosure or 
recusal--including name, title, employer, and the specific nature of 
the financial interest--should be filed with the Office of Government 
Ethics and made publicly available.

Questions From Ranking Member Mike Rogers of Alabama for Marc A. Pearl, 
 President and Chief Executive Officer, Homeland Security and Defense 
                            Business Council

              DHS CONTRACTING PROBLEMS AND MOVING FORWARD

    Question 1. What is the single most important thing DHS needs now 
and for the next administration so it can work towards programmatic 
success?
    Answer. The Homeland Security & Defense Business Council believes 
that there are a number of challenges and opportunities that the next 
administration and the U.S. Department of Homeland Security can do to 
ensure greater programmatic success, particularly in the area of 
developing a better and more effective relationship with the private 
sector. With regard to the theme of the hearing itself, the Council 
would believe the underlying foundation of achieving greater 
programmatic success is building on and further developing a mature 
acquisition process that allows for and facilitates an open, honest and 
professionally disciplined relationship to continue to exist between 
the public and private sectors.
    The Council supports the concept that a successful acquisition 
process must begin earlier than contracting activity itself is 
undertaken, as well as providing an open post-contract assessment 
dialog focusing on lessons learned. Before the ``blueprint'' is drawn 
up and after contract completion, experts on the ground and operational 
practitioners in the field need to be assembled and questioned. A 
successful process also requires equipping the entire team (contractors 
and program managers) with an understanding of the challenges and risks 
in place during the entire lifecycle of the project to ensure success.
    Question 2. In your prepared statement you state that the Homeland 
Security and Defense Business Council has offered to help DHS increase 
the number of certified project managers by offering to fund a new 
certification program through the Project Management Institute. What is 
the current status of this program and has the Department ``cherry-
picked'' from it for the Acquisition Intern Program?
    Answer. It is my understanding that when the Homeland Security & 
Defense Business Council made its offer a few years ago to help 
facilitate a process to assist in developing a stronger corps of 
certified project managers the Department was going through a 
cataclysmic personnel shift in its procurement office and was unable to 
respond to the offer. We are currently unaware of any further progress, 
but are attempting to work with the Department in order to see if our 
help can be utilized in the future. It is our understanding that the 
Acquisition Intern Program has been internally developed to increase 
the number of quality project managers.
    Question 3. Can you give an example of successful contracts at the 
Department?
    Answer. Each of our many members and many other companies have 
numerous success stories throughout the Department, but to cite only a 
few examples would be a disservice to our other members' successes.
    Question 4. Can you describe the top two or three areas where your 
members would want to see improved processes at the Department?
    Answer. The Homeland Security & Defense Business Council and its 
members support a process that mirrors this new environment and urges 
that the Department embrace these priorities as it moves forward in 
revitalizing it procurement process:
    Quality Contracting.--The Council supports the May 2008 statement 
of the bipartisan group of Senate Homeland Security & Government 
Affairs Committee members that, together with Chairman Thompson, called 
for more explicit requirements and performance standards in major 
contracts to ensure successful outcomes.
    Quality Acquisition Management.--The Council urges that the 
Department continue to develop acquisition work force tools to forecast 
needs and develop certification requirements. A new administration 
working with a new Congress now has the opportunity to further improve 
on procurement with sound program management, client-side support, and 
the improvement of the acquisition work force by focusing on the 
recruiting and training of more talented contracting officials. There 
should be integrated project teams, led by the Government, but with 
operational involvement of contractors.
    Quality People.--The Council cannot emphasize enough the need to 
increase the number of procurement officers with expertise in 
technology, engineering and management to accomplish the complex 
operational aspects of oversight and review.
    Question 5. Have any of your members attempted to engage the 
Department on their shortcomings and attempted to assist with best 
practices?
    Answer. Member companies are always informally engaging various 
executives and program managers at the Department individually and as 
members of the Council in order to find ways to be more successful 
together. It is in everyone's best interest and all the parties agree 
that projects are tailored to achieve success and that the goals and 
mission of the Department are achieved in partnership with those in the 
private sector who offer subject matter and project expertise. This 
process and the overarching dialog that this question encourages may--
in the long run--require better and more formal communication, 
coordination, and collaboration among the parties involved--Council 
members, together with congressional leaders, operational experts in 
the private sector on the ground, and DHS program/project managers--
working together to build off lessons learned in developing a more 
transparent best practices approach to the contracting process.

                                 
